Avaya Wins Approval for Its Plan to Exit Bankruptcy

The plan will slash Avaya’s debts by $2.6BN and free up more than $650 million of liquidity

Avaya Wins Approval for Its Plan to Exit Bankruptcy
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Published: March 23, 2023

Charlie Mitchell

Avaya will soon exit Chapter 11 Bankruptcy, with Judge David R. Jones stating that he will approve its plan.

Once initiated, the plan will wipe $2.6BN of its debt, which stood at $3.4BN before the filing.

The remaining $800M is due in 2028, with the agreement freeing up over $650M in liquidity for Avaya to invest in its solutions and services.

Avaya may do so after it officially leaves Chapter 11 protection, which it intends to do in the coming weeks – according to a lawyer representing the vendor.

The move shouldn’t impact the support and services Avaya offers its customers and partners.

Upon the announcement, Alan Masarek, CEO at Avaya, stated:

We embarked on this process with a clear goal – to create a stronger financial foundation that  enables us to build on our competitive industry  position, strengthen our partner ecosystem and better meet the needs of our customers with further investment in our cutting-edge, long-range product roadmaps.

Unfortunately, Avaya has been here before, filing for bankruptcy in 2017. As such, many will question its long-term viability.

However, Avaya will avoid much of the scrutiny it has endured in recent years when it exits bankruptcy, as it will become a private company.

Masarek also aims to shift the focus towards its innovation roadmap – as Avaya shared with CX Today in December – which he hopes will differentiate its offerings.

“With considerable resources to execute on our R&D initiatives and cloud communications roadmap, we intend to accelerate the delivery of exceptional experiences to our customers and partners,” added Masarek.

The CEO also took the opportunity to thank the 90 percent of Avaya’s lenders that backed its restructuring agreement.

These will receive a percentage stake in the business relative to the debt they held.

Masarek stated:

The resounding support for our restructuring plan is a testament to the significant value our investors see in our business and the solutions we provide, and we look forward to capitalizing on  the opportunities ahead.

Those opportunities remain promising, as 90 Fortune 100 companies work with Avaya – according to a December 2022 earnings release.

If the vendor can increase the appeal of its CCaaS offering and migrate those customers to the cloud, it may generate significant revenue.

Yet, Avaya must ensure their loyalty to work its way back to growth, which it plans to do by 2025.

Its last earnings results at the tail end of 2022 suggests this may prove a tricky task, with revenues down by over a third year over year.

Moreover, it must battle lawsuits due to the alleged actions of former CEO Jim Chirico – with one accusing Avaya of “massive fraud.”

There are also likely to be many employees frustrated by its bankruptcy plan, as those with stock options may have effectively seen a significant chunk of their savings bite the dust.

As such, Masarek – and the new c-suite that will come onboard after it exits bankruptcy – may have oceans of choppy waters still navigate.

Yet, with a much healthier balance book, Avaya is ready to release its Chapter 11 lifejacket.

“I am pleased with our progress as we prepare to complete this critical step of our business model transformation, and I am grateful for the confidence of our customers, partners, team members, and investors along the way,” concludes Masarek.



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