Avaya has filed for bankruptcy to wipe off more than 75 percent of its $3.4bn debt.
The Chapter 11 filing in the US brings clarity to an uncertain saga that has rumbled on for months amid Avaya’s stalled move to the cloud.
The vendor characterised the bankruptcy as an “action to accelerate transformation and fortify capital structure”.
As part of the move, Avaya has secured $780m in new financing and plans to restructure its balance sheet.
Alan Masarek, Chief Executive Officer at Avaya, said: “I joined Avaya to help unlock the power of its iconic brand, global customer footprint, massive partner ecosystem, large-scale communications deployments and outstanding team.
“Building on this tremendous foundation, 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.
“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.”
Avaya insisted that the service it provides to customers and partners will not be impaired during the process, which it expects to take between 60 and 90 days. It claims its plan is supported by more than 90 percent of its existing secured lenders.
The move will also see Avaya delist from the New York Stock Exchange.
RingCentral Support
RingCentral released a press release at the same time as Avaya’s announcement to reaffirm its commitment to the pair’s relationship.
The tie-up sees the pair go to market with Avaya Cloud Office by RingCentral. Both vendors said the agreement has been “extended and expanded” but were vague on details.
“Under the terms of the expanded agreement, RingCentral and Avaya have agreed to extend their multi-year partnership with minimum seat commitments and a better aligned incentive structure intended to drive accelerated migration to ACO,” RingCentral said in a statement.
“These improvements will unlock further opportunities for RingCentral and Avaya to maximize value for their customers. The partnership has also expanded to include additional go-to-market models that enable Avaya to sell Avaya Cloud Office to its installed base on a direct basis.”
Avaya’s restructuring will also see RingCentral’s stake in the firm wiped out. RingCentral acquired around six percent of Avaya when the ACO partnership was announced in 2019, valued at around $125m.
The story so far
Avaya exited bankruptcy in 2018 when it listed on the New York Stock Exchange under the leadership of Jim Chirico. All appeared to be well for some time, with the vendor boasting of its successful ongoing transition to becoming a cloud-first company.
However, cracks started to appear when a series of delayed deals rocked its financials.
The troubles continued, leading to Chirico’s abrupt sacking and the creation of a cost-cutting plan which involved axing jobs.
Former Vonage boss Alan Masarek has been at the helm ever since, championing a simplified offering and product portfolio. Avaya recently hinted that it would trim back its product line.
Amid the restructuring is a legal wrangling, in which investors are claiming that members of Avaya’s board committed “massive fraud”.
The tussle relates to cash Avaya raised last year before revealing the true nature of its financial struggles.
