IP telephony giant Avaya have filed for Chapter 11 bankruptcy, citing the need to refresh an reorganise their capital structure and corporate funding arrangements. The company’s public statement had this to say:


This is a critical step in our ongoing transformation to a successful software and services business. Avaya’s current capital structure is over 10 years old and was put in place to support our business model as a hardware-focused company, which has evolved significantly since that time. Now, as a result of the terms of Avaya’s debt obligations and the upcoming debt maturities, we need to recapitalize the Company.”


The move comes in the wake of the industry zeitgeist shifting to software-as-a-service and clouded voice solutions, and while Avaya had made strides in this direction Cisco and Microsoft were ahead of the curve and didn’t have the same debts to contend with. As a result it made attempts last year to sell its call centre and customer service operations for a reported $3 billion to American firm Genesys Labs, but that move fell through earlier this month.


Investors seemed untroubled by the move, which temporarily relieves them of their obligations to creditors, with multinational Citibank underwriting a $725 million loan to tide them through the restructuring process. The company’s financials also remain solid, with Q4 revenue last year of $958 million and a hefty 60% margin on its growing services and software products. The company will operate as normal during the restructuring process, and it expects the transition to new arrangements to take between 45 and 60 days to complete.

If you are an Avaya customer and would like to read more on this there is further analysis available here

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