Afiniti has filed for Chapter 15 bankruptcy in the US.
Chapter 15 bankruptcy is a way to ask for help from a court in the US to protect the business while it evaluates how to pay back the money it owes, both in the US and elsewhere.
With a reported $580 million in liabilities, the Bermuda-based AI customer experience vendor lodged its petition in the U.S. state of Delaware, having gone into provisional liquidation in Bermuda back in September.
In gaining Chapter 15 bankruptcy recognition in the U.S., Afiniti will shield the company’s American assets while it negotiates with the U.S. courts.
Afiniti confirmed the filing in an official announcement on its website, stating that it had “initiated the next steps” in its balance sheet restructuring and recapitalization processes.
Hassan Afzal, CEO of Afiniti, claimed that this would allow the vendor to strengthen its “financial foundation and position us well for future growth and success.
We are grateful to have the support of our lenders, which demonstrates their belief in our business and confidence in our growth prospects.
“I would also like to thank our talented employees for their hard work and unwavering commitment to Afiniti and our customers.”
Afzal also thanked Afiniti’s customers and advised that the business will continue to operate as usual throughout the restructuring process.
It is important to note that while a traditional chapter 15 does not involve provisions for the reorganization of debt, Afiniti’s filing includes an Approval of Restructuring Support Agreement, which confirms that the vendor has “in good faith and at arm’s length negotiated and agreed to the terms of a restructuring transaction.”
Indeed, a Valuation Report has determined that “the assets of the Company are materially less than its liabilities” and are “most likely insufficient to discharge the secured indebtedness that would be owed by the Company.”
One CX Rival Takes Aim: No More “Fake AI”
Naturally, the news of Afiniti’s bankruptcy filing has made waves in the CX space, with several high-profile leaders and professionals lending their voices to the discussion.
Most notably, NICE’s VP of Product Marketing, Andrew Traba, was quick to criticize Afiniti, labeling it a “fake AI” company that uses “smoke and mirrors.”
In a LinkedIn post, Traba accused the company of failing to deliver on its promises of AI-powered CX, claiming that it favored “flashy demos and bold promises” over tangible business results.
In response to Traba’s post, Laurent Philonenko – a Managing Partner of CX consultancy firm, DeepTech Group – appeared to defend Afiniti, pointing to a section of the filing that suggested the rise of generative AI (GenAI) had negatively impacted the company’s business.
In the document, the vendor claimed that the release of ChatGPT had led to client interest in AI shifting to GenAI “almost overnight.”
According to Afiniti, this resulted in major clients focusing their AI budgets on GenAI for customer care, rather than on Afiniti’s outcome-predictive AI for optimizing contact centers.
Philonenko detailed how Afiniti was “not the only AI company experiencing a mix of debt and generative AI disruption.
“Recently, Amelia sold for much less than the funds it attracted in 2023. LivePerson’s valuation has been destroyed, and the bloodbath is not over.
It’s almost as if any AI technology developed pre-ChatGPT is irrelevant.
However, Traba seemed to have little sympathy with Afiniti’s position. The NICE man argued that ChatGPT spurred organizations to increase their overall AI investment rather than shifting funds from other AI types to GenAI.
“The market simply no longer likes loss-making growth companies,” he wrote.
Regardless of precisely how Afiniti has gotten into this position, there’s no denying that it’s a dark day for the company. But is there a way back from the brink?
Back from the Brink?
While Afiniti is certainly in an unenviable position, it might not be all doom and gloom.
Less than two years ago, fellow CX tech vendor Avaya went through a very similar situation when it filed for Chapter 11 bankruptcy.
At the time, Avaya had $3.4 billion in debts and had endured a 36 percent year-over-year drop in revenue in the previous quarter.
Yet, only 76 days after filing for bankruptcy, the company exited Chapter 11 protection, having secured approval for a pre-packaged plan to repay creditors and restructure its finances.
Meanwhile, CCaaS provider Lifesize also filed for Chapter 11 bankruptcy last year, before Enghouse swooped in and acquired its assets.
