Citing a need to recapitalize the company, Avaya filed voluntary petitions under chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York.
The company also announced a $725 million debtor-in-possession DIP financing facility underwritten by Citibank.
“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, Chief Executive Officer of Avaya. “Reducing the Company’s current debt through the chapter 11 process will best position all of Avaya’s businesses for future success.”
“This is a critical step in our ongoing transformation to a successful software and services business. Avaya’s current capital structure is over 10 years old and was put in place to support our business model as a hardware-focused company, which has evolved significantly since that time. Now, as a result of the terms of Avaya’s debt obligations and the upcoming debt maturities, we need to recapitalize the Company,” continued Mr. Kennedy. “Our business is performing well, and we are confident that we can emerge from this process stronger than ever, as this path is a reflection of our debt structure, not the strength of our operations or business model. Pursuing restructuring through chapter 11 will enable us to reduce Avaya’s debt and interest expense, while providing increased financial flexibility to further invest in innovation and growth to enhance our market-leading competitive position. Most importantly, we are keenly focused on minimizing disruption to our customers, partners, and employees and do not expect to experience any material disruptions during the chapter 11 cases.”
Separately, Avaya reported Q4 2016 revuenu of $958 million, up $76 million compared to the prior quarter as demand improved for products and services, and decreased $50 million year-over-year, due to lower demand for unified communications hardware. GAAP gross margin was 60.9% for the fourth quarter. GAAP operating loss was $428 million, reflecting $542 million of impairment of goodwill and intangibles. Non-GAAP operating income was $229 million which compares to $180 million for the prior quarter and $202 million for the fourth quarter of fiscal 2015. For fiscal 2016, Avaya reported revenue of $3,702 million, down 9% compared to fiscal 2015, or down 8% in constant currency. GAAP gross margin for fiscal 2016 was 60.6%.
