Unified communication

Ailing Avaya Takes Cover From Bankruptcy

Unified comms specialist Avaya has filed for bankruptcy protection as it looks to get on top of debts that are taking a heavy earnings toll, while ruling out any short-term sale of its contact center business. (See Avaya Files for Bankruptcy Protection.)

Avaya Inc. began life as a hardware player and has been struggling to reinvent itself as a provider of software and services in the era of cloud-based communications.

With debts of around $6.3 billion, the enterprise communications vendor coughed up interest payments of about $470 million in 2016, a figure that resulted in its net loss widenening to $750 million, from $144 million in 2015.

Its latest earnings statement, published this week, also shows that revenues fell by 9.2% last year, to $3.7 billion. Avaya blamed year-on-year setbacks in the fourth quarter on lower demand for unified communications hardware, but services revenues also shrank. (See Avaya's Losses Widen in 2016.)

In a statement, Avaya said it had managed to obtain a $726 million "debtor-in-possession" financing facility that would provide sufficient liquidity to support its business operations.

"We have conducted an extensive review of alternatives to address Avaya's capital structure, and we believe pursuing a restructuring through chapter 11 is the best path forward at this time," said Kevin Kennedy, Avaya's CEO, in the statement. "Reducing the Company's current debt through the chapter 11 process will best position all of Avaya's businesses for future success."

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Kennedy went on to explain that Avaya does not believe a sale of the contact center business would deliver maximum value for customers and stakeholders but that it remains open to the divestment of other assets.

The company was reportedly in negotiations last year over the sale of the contact center business but failed to reach an agreement with prospective buyers.

Kennedy said that Avaya's current capital structure is more than ten years old and was set up to reflect the company's hardware focus at the time. "This is a critical step in our ongoing transformation to a successful software and services business," he remarked on the chapter 11 process.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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