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Financial woes worsen as Avaya attempts turnaround

Hafizah Osman | April 24, 2017
Vendor reveals worrying preliminary unaudited financial results for the second fiscal quarter.

Avaya has unveiled worsening financial numbers as it continues to combat rising debt levels, with declining revenue rates expected for the second fiscal quarter ended 31 March, 2017.

The results follow the filing a chapter 11 plan of reorganisation, which outlines a path to "significantly reduce" Avaya's pre-filing debt, in a move designed to strengthen the vendor's balance sheet, improve financial flexibility and position it for long-term success.

Yet such attempt at progress comes at a time of worrying financial results, with the vendor facing declining revenue rates across the board.

Revealing during its preliminary unaudited financial results, second quarter revenue is expected to be in the range of US$800 to US$803 million, reflecting about nine per cent to 11 per cent sequential decline from the second quarter of the previous year.

The meagre financial results follow the company's Chapter 11 bankruptcy filing, announced on 19 January, 2017.

In addition to the financial revenue range, the vendor said its adjusted EBITDA is expected to be in the range of US$195 million to US$200 million, or 24.4 per cent to 24.9 per cent of its revenue.

Meanwhile, its cash balance is expected to stand at around US$764 million, allegedly reflecting debtor-in-possession (DIP) financing proceeds and positive cash flow from operations.

According to Avaya, these financial results for the second fiscal quarter are preliminary and subject to the completion of financial closing procedures and review procedures performed by its independent auditors.

"There can be no assurance that the company's final results will not differ from these preliminary estimates as a result of quarter-end closing, review procedures, or review adjustments, and any such changes could be material," Avaya said in a statement.

As reported by ARN , under the proposed plan, which will continue to evolve as Avaya works toward creditor consensus and confirmation by the Court, strategies are in place to reduce the company's pre-filing debt by more than US$4 billion.

"[The plan] is a crucial step forward in our effort to recapitalise Avaya's balance sheet and create a stronger and healthier company that can create even more value for our customers," Avaya CEO, Kevin Kennedy, said previously.

"In addition, the company's consolidated balance sheet now has more than $750 million in cash, reflecting DIP financing proceeds and positive cash flow from operations.

"We remain confident in our ability to maximise value for all of our stakeholders and to complete our balance sheet restructuring as soon as reasonably possible."

Avaya also recently entered into an asset purchase agreement with Extreme Networks to sell its networking business.

As part of the agreement, Extreme Networks will serve as the primary bidder in a section 363 sale under the US Bankruptcy Code to acquire Avaya's networking business for a transaction value of about US$100 million, subject to adjustments.


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