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Avaya: How we arrived at Chapter 11

John Sullivan, CFA, VP and Corporate Treasurer, Avaya Inc. | Jan. 30, 2017
A letter from the Corporate Treasurer

Restructuring through chapter 11 will reduce Avaya’s debt burden and corresponding interest expense, enhancing our financial flexibility and enabling further investment in innovation and growth. We continue to support mission-critical infrastructure and services in all sectors, including education, government, technology and healthcare. The restructuring will enable us to focus on our core mission and future success. It remains business as usual for our company and we are keenly focused on minimizing disruption to our customers, partners and employees. 

We are fortunate to operate in a legal system that allows companies to restructure their balance sheets and continue to operate as healthy businesses, providing jobs, technology innovation and value to customers. The ability to borrow on credit is a hallmark of a strong economy, with risk-sharing mechanisms that allow access to capital for borrowers and financial returns for investors.

The smooth functioning of that system is vital grease in the cogs of commerce. But there is inherently risk involved. Too much debt, debt taken on for the wrong reasons, debt that is too freely available, or business conditions that change significantly after substantial debt is undertaken, can rapidly create an unsustainable burden, as many individuals, companies and even sovereigns have discovered. It’s a cautionary tale we can all learn from.

 

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