DURHAM – Avaya announced on Tuesday that it would restructure its financial situation, under which the company anticipates eliminating more than 75% of its debt and increasing liquidity in the business.
The plan required the company, and all of its U.S. subsidiaries, to file for Chapter 11 bankruptcy.
With headquarters in Durham, and a large presence in the region, Avaya had warned in August that there was “substantial doubt” about its ability to survive.
Earlier this year, the company received notice that its stock was trading below the minimum price listing criteria of the New York Stock Exchange, and analysts again became concerned about the firm’s viability.
Now, a statement from the company says that the financial restructuring process will reduce its debt by more than 75%. The current debt load is $3.4 billion, but after the restructuring process, the firm will carry only about $800 million in debt.
Executing this maneuver, which the company said was agreed to by “more than 90%” of its secured lenders, is expected to also strengthen the firm’s liquidity.
The bankruptcy process could occur in as little as 60 days.
Tech firm Avaya warns ‘substantial doubt’ about ability to survive; layoffs loom
CEO calls maneuver a ‘transformation’
“Strengthening Avaya’s capital structure is a critical step to fully realize our transformation, and we are excited to move ahead as a well-capitalized company with one of the strongest balance sheets in our industry that includes substantial cash to invest in our own success,” said Alan Masarek, the company’s CEO, in a statement.
Masarek joined the company in July 2022 after the firm’s longtime CEO Jim Chirico was “removed.” Avaya also cut jobs multiple times in 2022, including in September 2022.
Along with the bankruptcy filing, Avaya completed other customary motions at the U.S. Bankruptcy Court for the Southern District of Texas, it said in the statement.
Such motions will enable the company’s operations to continue during the process, including the payment of its workers and vendors.
To facilitate, Avaya will receive $628 million debtor-in-possession financing, it said.
And Masarek is confident about the company’s future, despite the bankruptcy filing.
“We have made significant progress pioneering an ambitious business model transformation, establishing a competitive product strategy for our subscription and cloud-delivered services and implementing operational efficiencies to better serve the Avaya ecosystem,” he said in a statement.
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