Former networking giant Avaya Holdings Corp has filed for Chapter 11 bankruptcy and secured $780 million in funding while it restructures its business. Earlier in September, Avaya had also announced a restructuring, including job cuts, to cut costs. Avaya’s stock has fallen nearly 99% over the past year. This is the second time Avaya has filed for bankruptcy. Avaya filed for bankruptcy in 2017.
What is Chapter 11?
Chapter 11 is a section of US bankruptcy law that allows companies to reorganize their capital structures while continuing to conduct business normally.
Measures that do not affect employees
Avaya said in a statement that “these actions will have no impact on the company’s customers, distribution channels and strategic partners, suppliers, vendors or employees.” The company emphasizes that it is not going out of business. “Our business remains intact and we are not selling or spinning off any part of it,” the company said. The Company expects this financial restructuring to be completed within 60 to 90 days.
Assets and liabilities listed
In its bankruptcy court filing, Avaya lists total assets of between $1 billion and $10 billion and total liabilities of between $1 billion and $10 billion. The company puts the number of creditors at between 25,001 and 50,000. “Completion of the financial restructuring will reduce our overall debt by more than 75%, from approximately $3.4 billion today to approximately $800 million. Additionally, it will significantly increase our cash and liquidity position, allowing us to make significant investments in our innovative cloud-based communications portfolio and position Avaya for long-term success,” the company said in a statement.
Microsoft among the creditors
In the court filing, the company listed the creditors with the largest unsecured claims. These include Verint Americas of $22.93 million; Microsoft for $9.01 million; Wistron Corp for $8.9 million; and SHI International for $7.71 million.
Speech by the CEO of Avaya
Alan Masarek, Avaya Chief Executive Officer, said, “I joined Avaya to help unleash the power of its legendary brand, global customer footprint, vast partner ecosystem, large-scale communications implementations and amazing team. Building on this tremendous foundation, we have made significant progress by driving an ambitious business model transformation, developing a competitive product strategy for our subscription and cloud services, and implementing operational efficiencies to better serve the Avaya ecosystem. Strengthening Avaya’s capital structure is a critical step to fully realize our transformation and we are pleased to move forward as a well capitalized company with one of the strongest balance sheets in our industry, containing significant cash to invest in our own success. “