Avaya Says Bankruptcy Won’t Affect India Business
American multinational technology company Avaya has filed for bankruptcy protection in the United States. The company, which is reeling under debt of about $6 billion, has filed voluntary petitions under chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court.
The company’s lawyers reportedly said a significant portion of the $725 million loan, extended by an affiliate of Citigroup for up to a year, was funded by Avaya’s existing lenders. Meanwhile, the court judge granted Avaya approval to tap $425 million loan proposed to carry the telecommunications company through its restructuring on Friday. Avaya plans to return to U.S. bankruptcy court on Monday for approval on other expenses.
While there are clouds of uncertainty over its US operations, the India business will not be affected due to the current financial crisis, the company said. India is among the top ten markets for Avaya in terms of turnover.The company has 2,200 employees in India. Over 30% of company’s products and solutions development are done out of R&D centres in Bangalore, Pune and Hyderabad.
“In the last three years we have seen around 13 -19% growth and we expect this growth to continue in future. Avaya India is working closely with state governments on providing emergency response systems and work on digitization of education initiatives as major target areas,” Avaya India said in a statement.
In a separate statement, Avaya said it has commenced a formal proceeding to restructure its balance sheet to better position itself for the future. The Company’s foreign affiliates are not included in the filing and will continue normal operations.
“The company’s foreign affiliates are not included in the filing and will continue normal operations,” it added. “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,” he added.
Avaya has consistently reported losses, stemming in part from costs related to its debt. The Santa Clara, Calif.-based company faced potential penalties from lenders on Jan. 28 after it did not turn in its annual financial statements for its fiscal year on Dec. 29. Avaya has liabilities totaling about $1.5 billion stemming from its pension and other promised post-employment benefits. The company was taken private in 2007 for $8.2 billion by private equity firms Silver Lake Partners and TPG Capital.
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.
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