7220X plan - Avaya Aura Core Components Support (72200X) Updated: 2024

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The struggling UC giant, which filed for bankruptcy in February, has been granted court approval to being its financial restructuring plan with the goal of regaining the financial flexibility needed to heavily invest in its UCaaS portfolio, Avaya said on Wednesday.

Avaya Holdings Corp. on Wednesday received court approval of its financial restructuring plan, the company said in a statement.

The struggling unified communications giant can now begin its prepackaged restructuring plan on an accelerated basis, which includes reducing Avaya’s total debt by more than 75 percent and increasing its liquidity position to more than $650 million. The goal of the restructuring is to get the company to a place of financial flexibility so it can boost investment in its cloud-based communications portfolio, especially across its customer experience offerings, to position Avaya for long-term success, the company said.

Avaya’s current CEO Alan Masarek, who joined the company in August, will continue to lead Avaya when it emerges from bankruptcy.

“We embarked on this process with a clear goal – to create a stronger financial foundation that enables us to build on our competitive industry position, strengthen our partner ecosystem and better meet the needs of our customers with further investment in our cutting-edge, long-range product roadmaps,” Masarek said in a statement. “I am pleased with our progress as we prepare to complete this critical step of our business model transformation, and I am grateful for the confidence of our customers, partners, team members and investors along the way.”

Avaya, which recently changed its headquarters to Morristown, N.J., filed for Chapter 11 bankruptcy protection in federal court in Texas in February. The filing followed months of speculation of a bankruptcy declaration after the company’s 2022 cloud subscription accounting problems led to substantial earnings and revenue target misses.

[Related: Avaya Bankruptcy Filing: 5 Things To Know]

The company said that its subsidiaries outside of the U.S. are not included in its financial restructuring process. It also has no impact on Avaya’s stakeholders, including customers, channel and strategic partners, suppliers, vendors and employees. Vendors and suppliers are being paid in full in the normal course of business, regardless of when goods or services were delivered, Avaya added.

“We are operating normally and continuing to serve the Avaya ecosystem with outstanding communications solutions, service and support,” Avaya said in a statement on the reorganization. “The court’s confirmation of our plan marks the last major milestone of our financial restructuring, and we expect to formally emerge from this process in the coming weeks.”

In its bankruptcy court filing in February, Avaya lists total assets of between $1 billion and $10 billion and total liabilities of between $1 billion and $10 billion. The company lists its number of creditors as being between 25,001 and 50,000.

Avaya in the court filing listed its creditors with the largest unsecured claims, which included Verint Americas in the amount of $22.93 million; Microsoft for $9.01 million; Wistron Corp. for $8.9 million; and solution provider giant SHI International for $7.71 million.

Strategic Products and Services (SPS) and Consultedge have confirmed they will merge, meaning a joining of forces for two VAR 500 solution providers and two major East Coast Avaya partners.

Both 22-year-old SPS and 10-year-old Consultedge specialize in converged network infrastructure, IP telephony, unified communications and mobility. Each is an Avaya Platinum Business Partner, which is Avaya's highest level of partner classification. The two companies are also based about five miles from each other in northern New Jersey: SPS's headquarters are in Parsippany, while Consultege's are in Whippany.

Financial terms of the deal were not disclosed. SPS, ranked No. 260 on the 2010 VAR 500, reported $97.2 million in gross revenue for 2009 in its VAR 500 filing, an increase of 8 percent over 2008. Consultedge, ranked No. 478 in the 2010 list, reported $24.3 million in gross revenue its filing, a decrease of about 20 percent from 2008.

According to SPS President John Poole, the deal represents a good opportunity for Consultedge to expand its capabilities using SPS' resource pool, and for SPS to add market presence in New York, New Jersey and North and South Carolina.

"We're doing a pretty good job of adopting the new Avaya go-to-market strategy using channels, and the investments we've made in engineering and talent are serving us well," Poole said in a CRN.com interview Monday. "There are companies, like Consultedge, that are challenged to make those same kinds of investments, making it difficult to service customers. For us to merge a company like that onto the SPS infrastructure and provide access to our NOC and converged engineering team is a win-win, especially for customers. Once the merger is complete, the Consultedge team can tell a whole different story, and for SPS, it's a really good way to grow and add scale."

The companies expect to complete the merger in August.

Consultedge marks the third Avaya Platinum partner acquisition by SPS within the past two years. In February, it acquired Covina, Calif.-based Spenser Communications, and in September 2008, it acquired Fairfield, N.J.-based PhoneXtra, both of which were also Avaya Platinum partners.

For solution providers, Poole noted, the networking and infrastructure markets require a much broader set of skills than before, especially in converged networking infrastructure.

"We're no longer selling phone systems. We have software applications, the need to monitor them and the need to tell customers what's going to happen," he said. "There's been a bump in the road in terms of the economy, but customers still require increased support and infrastructure. Smaller companies don't always have the revenue to cover that type of growth."

Poole declined to elaborate on how Consultedge's executive team would fit into SPS, saying that would be addressed once the acquisition is complete.

Executives from Consultedge were not available for additional comment Monday, although Neal Stanton, president and CEO, said in a statement that it was a "strategic evolution" for his company.

"We see this intended merger as a strategic evolution that will enable us to take our customers to the next level of integrated solutions and support offers," Stanton said. "In addition to strengthening our vendor partnerships, we will gain access to highly specialized engineers, a 24 x 7 network operationg center support and global resources to support our clients."

Next: SPS Discusses Avaya, Channel Gains

Beyond Avaya, the two companies also both have vendor partner relationships with Aruba, Cisco, Eaton, Extreme Networks, HP, Juniper, Microsoft and Polycom. Both also added former Nortel product lines as a result of Avaya's $915 acquisition of Nortel's enterprise business unit last fall.

SPS in addition carries Citrix, Compellent, Kaspersky, Meru, Motorola and Tandberg, which Consultedge brings existing relationships with Adtran, LifeSize, Salesforce.com and Symantec.

Mergers and acquisitions in the Avaya and Nortel channels have been frequent as of late, as Avaya continues to merge the two formerly competitive channels and product portfolios. Broken Arrow, Okla.-based Xeta Technologies, ranked No. 306 on the 2010 VAR 500, is another Avaya heavyweight that's bought several companies in the last few months.

SPS' Poole said he was encouraged by Avaya's progress in building out its channel program and making good on its promise to help Avaya and Nortel VARs grow business.

"Developing a sustainable business model around channel is a good thing for us. In a transition, there are bumps and also opportunities," Poole said. "Overall I think they are aligning things and making a very positive story."

The problem for smaller solution providers is often one of leverage, Poole said. Now that Avaya is bigger in size and in channel, it's often VARs with fewer competencies that are challenged to compete more effectively.

"I think we need to be nimble," he said of solution providers. "Some days, it's, 'I've been running plays on the left, now I've got to run them to the right.' Those types of issues affect smaller companies like Consultedge who may not be as readily positioned to change tactics."

Avaya announced today that the United States Bankruptcy Court for the Southern District of New York (the “Court”) has confirmed its second amended chapter 11 plan of reorganization (the “Plan”).  As a result, Avaya expects to emerge from its restructuring process before the end of this year. 

“The Court’s approval of our plan is the culmination of months of hard work and extensive negotiations among our various stakeholders,” said Jim Chirico, Avaya’s President and CEO. “In the coming weeks, Avaya will emerge from this process stronger than ever and positioned for long-term success, with the financial flexibility to create even greater value for our customers, partners and stockholders.”

Avaya projects to have approximately $2.925 billion of funded debt and a $300 million senior secured asset-based lending facility available upon emergence from chapter 11 protection, a substantial reduction from the approximately $6 billion of debt on its balance sheet when Avaya commenced its financial restructuring.  This revised capital structure is expected to result in more than $200 million in annual cash interest savings compared to fiscal year 2016.

“I want to thank our customers and partners for their continued support,” Chirico said. “The trust and loyalty of our global customer base and partner network have played a vital role in Avaya’s success throughout this process.” 

“I also want to thank our dedicated and driven employees, who have remained focused on delivering innovative solutions and industry-leading service that our customers expect from us,” Chirico continued. I look forward to working with our employees, customers and partners as we write the next chapter of the Avaya story.”

Centerview Partners LLC and Zolfo Cooper LLC are Avaya’s financial and restructuring advisors and Kirkland & Ellis LLP is the Company’s restructuring counsel.

Miranda Brookins is a marketing professional who has over seven years of experience in copywriting, direct-response and Web marketing, publications management and business communications. She has a bachelor's degree in business and marketing from Towson University and is working on a master's degree in publications design at University of Baltimore.