Where now for troubled Avaya?
Vendor VP talks through plans to clear debt and restructure
Avaya is aiming to complete its Chapter 11 restructure this autumn, according to its vice president of finance, Bill Sherry.
The comms vendor announced yesterday that a group of Avaya shareholders - who are owed more than 50 per cent of Avaya's first lien debt, have signed an agreement to support its amended restructure plan, wiping more than $3bn from Avaya's debts.
Former CEO Kevin Kennedy - who has now stepped down from his post following the announcement - described the news as an important milestone in the firm's bankruptcy protection process.
Sherry said Avaya is aiming to emerge from its restructuring process this autumn. But the vendor still has to secure approval for its amended restructure plan from its other creditors, including second lien holders, cross over groups and unsecured creditors - among which are major channel firms Avnet, SHI and World Wide Technology.
"The big date coming up is 23 August, which is the court date, and we are going to seek approval of our revised disclosure and the PSA we signed [yesterday]," said Sherry.
"From there we will then have 30 to 45 days where we will look for a formal approval. We are hoping for the court approval on 25 August then we will look for a vote of the first lien holders, second lien holders and the unsecured and we believe that in 30 to 45 days we will be able to obtain that."
Once Avaya has secured backing from all relevant shareholders following its court date on 23 August, the firm will look to make progress in getting listed on either the New York Stock Exchange, or NASDAQ, according to Sherry. Avaya has been owned jointly by investors Silver Lake and TGP Capital since 2007 after they acquired the comms vendor for $8.3bn.
"When we entered into Chapter 11 for mostly our US entities, we restructured the balance sheet and gave ourselves a more competitive capital structure. I think with this amended plan we have just filed, we will be able to do just that. We will be able to take our debt down from about $6bn to $2.9bn, interest payments by $200m, and all that makes us more competitive," he said.
Sherry also cited Avaya's divestment of its networking business to Extreme Networks, which closed on 14 July, as another way in which Avaya is striving to trim down, become more competitive and double down on its unified communications (UC) and contact centre (CC) portfolios.
The VP said the company intends to reassure partners and customers about Avaya's position in the UC market, claiming that "reducing uncertainty is key" as the firm emerging from its Chapter 11 filing.
"I think one of the issues with a bankruptcy is it is not always well understood. It does have a negative connotation for many people, but in our case it really was necessary to restructure the balance sheet, so one of the major things as we emerge, it will take out the uncertainly with regards to the financials," he said.
"When we look at the business from our vantage point, we do see major expansions… There are a lot innovations with regards to cloud offers, both in UC and CC, to be able to enter into that cloud space."
He added: "Some of the things we have come out with, like Oceana, we will look at Equinox that we continue to invest in, Breeze, and then we will look at some of the overall cloud offers. That is the focus, and that has been the focus, and I think that is where the R&D dollars will continue to flow."
With a healthier balance sheet and a new capital structure, Sherry said that Avaya will be able to look at growth opportunities both in-house and through M&A.
"It gives us new opportunities. We don't necessarily have plans, but it gives us opportunity to explore new ways in the cloud business," he said.
"I think a clean balance sheet and operating [performance] will allow us to look at different opportunities as they come up. We will be looking at both internal as well as external opportunities; you never know what they are until they present themselves. Right now we don't have any definitive plans but we always have the ability to look across the horizon to see what's advantageous."