Avaya Files for Chapter 11, Continues Day-to-Day Operations

Avaya starts restructuring process as it attempts to handle debt.

By Sean Michael Kerner | Posted Jan 19, 2017
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Avaya is restructuring and has filed for Chapter 11 bankruptcy protection in the U.S. The move does not mean that Avaya is out of business, with day-to-day operations set to continue as the company comes to terms with its oversized debt load.

The news on the Chapter 11 filing comes as the company reports its fourth quarter and fiscal 2016 results. For the full year, Avaya reported revenue of $3.7 billion, down nine percent from 2016. Avaya reported a net loss of $750 million for the year, up from the $144 million the company lost in 2015.

Avaya is not holding its quarterly conference call with financial analysts today.

"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," Kevin Kennedy, Chief Executive Officer of Avaya, said in a statement. "Reducing the Company's current debt through the chapter 11 process will best position all of Avaya's businesses for future success."

In a question and answer document, Avaya emphasized that the chapter 11 filing does mean the company is going out of business.

"Like many companies that have used chapter 11 to improve their balance sheet, including General Motors and American Airlines, we will continue operating in the ordinary course while we restructure our balance sheet," the company stated. "Our decision to restructure our balance sheet reflects our debt level and not our operations or financial performance, which have been, and continue to be, strong."

Looking specifically at Avaya's fourth quarter performance, the company reported that its cloud and managed services revenue grew 3 percent year-over-year, while contact center product revenue increased 13 percent year-over-year.

Avaya's networking product revenue improved by 31 percent year-over-year. Somewhat ironically, Avaya largely entered the networking market tin 2009 through its $900 million acquisition of Nortel's enterprise assets. Nortel had similarly struggled through a period of debt restructuring, ultimately ending in the company selling off its assets and going out of business.

Sean Michael Kerner is a senior editor at EnterpriseNetworkingPlanet and InternetNews.com. Follow him on Twitter @TechJournalist.

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