How Does Avaya Filing for Chapter 11 Affect You?

Newmarket, ON – On January 19, 2017, Avaya announced that it had voluntarily commenced plans to restructure its balance sheet under Chapter 11 bankruptcy protection in the USA. Chapter 11 offers companies legal protection, guidance and time to restructure finances, including debt. In Avaya’s case, this process will allow it to constructively address its debt level.

Avaya has been very clear in its communication to partners, customers and employees that it does not expect any material disruption to its business as a result of its filing. This includes a commitment to all products, services and programs. Their operations outside of the US are not part of this filing and again, Avaya has indicated that they will continue to operate as before, with uninterrupted support from their US based operations.

As you may know, Avaya has been evaluating a variety of strategic options for its business over the past year in order to address its debt concerns. Avaya believes that this process will improve its capital structure, allowing it to emerge as a healthier and more innovative software and services company.

Unity was recently been recognized as Avaya’s Partner in Customer Excellence for 2016/17 for our outstanding support and service of our Avaya-based customers and will continue to do so with fully trained service personnel across the Avaya portfolio. In addition to serving as one of Avaya’s largest Canadian business partners, we also offer a wide choice of industry-leading cloud and premise based solutions.

Here is Avaya’s announcement in full:

NEW YORK — January 19, 2017 – Avaya Inc. (together with certain of its domestic subsidiaries, collectively, the “Company”) today announced that it has commenced a formal proceeding to restructure its balance sheet to better position itself for the future. To facilitate this restructuring, the Company filed voluntary petitions under chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the “Court”). The Company’s foreign affiliates are not included in the filing and will continue normal operations.

The Company has obtained a committed $725 million debtor-in-possession (“DIP”) financing facility underwritten by Citibank. Subject to Court approval, this DIP financing, combined with the Company’s cash from operations, is expected to provide sufficient liquidity during the chapter 11 cases to support its continuing business operations and minimize disruption.

“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,” said Kevin Kennedy, Chief Executive Officer of Avaya. “Reducing the Company’s current debt through the chapter 11 process will best position all of Avaya’s businesses for future success.”

As part of Avaya’s comprehensive assessment of options to address its capital structure, the Company evaluated expressions of interest in various Avaya assets, including its Contact Center business. After extensive evaluation in consultation with its financial and legal advisors, the Avaya Board of Directors has determined that focusing on the Company’s debt structure is paramount and a sale of the Contact Center business at this time would not maximize value for Avaya’s customers and all of its stakeholders. Avaya remains in ongoing negotiations to monetize certain other assets, as appropriate, to maximize value for all stakeholders.

“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,” continued Mr. Kennedy. “Our business is performing well, and we are confident that we can emerge from this process stronger than ever, as this path is a reflection of our debt structure, not the strength of our operations or business model. Pursuing restructuring through chapter 11 will enable us to reduce Avaya’s debt and interest expense, while providing increased financial flexibility to further invest in innovation and growth to enhance our market-leading competitive position. Most importantly, we are keenly focused on minimizing disruption to our customers, partners, and employees and do not expect to experience any material disruptions during the chapter 11 cases.”

Contemporaneously with the filing of the voluntary petitions, the Company filed a number of “first-day” motions with the Court to facilitate a smooth transition into chapter 11 and minimize business disruption. Among other things, the motions request authorization to continue certain customer and partner programs, and to honor certain employee compensation and benefit obligations.

For more information about the chapter 11 case, including access to Court documents, please visit: https://cases.primeclerk.com/avaya.

Centerview Partners and Zolfo Cooper are the Company’s financial and restructuring advisors, Goldman Sachs is the Company’s M&A investment banker and Kirkland & Ellis LLP is the Company’s restructuring counsel.

We will continue to keep you informed throughout this restructuring process. Please don’t hesitate to reach out to your Unity contact directly if you have any concerns or questions.