Avaya Files for Chapter 11 Bankruptcy

by San Antonio Attorney

Avaya, an American tech company, filed for Chapter 11 bankruptcy to lighten its debt load of around $6.3 billion.  The company tried to sell its call center unit in 2016.

The bankruptcy emphasizes the trials telecommunications businesses face as they shift from hardware to software services.  Clayton, Dubilier & Rice, a private equity firm, tried to buy the call center unit of Avaya for $4 billion but that deal fell through.

The company plans concentrate on reducing its liabilities and that a sale of the call center would not make the most value for its creditors or clients, Avaya said.  It is currently in talks deals to sell certain parts of its business.

The company is chewing over the details of a restructuring agreement with creditors.  The initial target was to come up with one before filing bankruptcy, but a deal was not reached.

The firm said an associate of Citigroup Inc. would give access to a $725 million credit for one year to finance its operations throughout the reorganization.

Avaya said the financing was necessary to assure nervous vendors who had been cutting payment periods and decreasing credit terms recently over apprehensions regarding the financial health of the company.

Avaya’s restructuring adviser said the without extra funding could force debtors to liquidate in an accelerated basis.  They needed the money to pay for the high administrative costs of filing bankruptcy.

The deadline for reaching a deal with creditors is end of January.

Avaya has been weighed down by liabilities originated from an $8.2 billion takeover in 2007 by TPG Capital and Silver Lake Partners.  The company has $600 million payable this coming October.  Interest payments of over $400 million annually have been caused the company’s losses.

The company owed $1.7 billion to its pensions as of September 2016.

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