When Avaya filed for Chapter 11 bankruptcy in the United States in January last year, local partners could have been forgiven for questioning the future of the company. But the move ultimately saw the vendor’s local partner network lean in, not out.
The US-headquartered unified communications vendor filed for Chapter 11 -- which permits reorganisation under US bankruptcy laws -- in a move to reduce its pre-filing debt, strengthen its balance sheet and improve financial flexibility for the long term.
In April last year, the vendor unveiled worsening financials as it continued to combat rising debt levels, expecting declining revenue rates in the second fiscal quarter ended 31 March, 2017.
Avaya subsequently filed an amended plan of reorganisation in its chapter 11 cases, supported by a majority of shareholders of its first lien debt.
In late November last year, Avaya said it expected to emerge from Chapter 11 bankruptcy in its home country by the end of the year, a promise it kept, with the company successfully completing its emergence from bankruptcy in the US by mid-December and taking steps to list on the New York Stock Exchange -- which it did in January.
“This is the beginning of an important new chapter for Avaya,” Avaya president and CEO, Jim Chirico, said late last year. “In less than a year since the commencement of our chapter 11 restructuring, Avaya has emerged as a publicly traded company with a significantly strengthened balance sheet.”
While the bankruptcy proceedings in the US had no financial bearing on Avaya’s operations in Australia and New Zealand, which maintains its own books, it did see the vendor’s local leadership front up to substantially more customer meetings than usual.
“The effect that it had was that, on the positive side we had greater connections with our customers and partners,” Avaya’s managing director for Australia and New Zealand, Peter Chidiac, told ARN. “What I mean by that is that they all wanted to know what was happening to the company.
“So, all of a sudden he had this engagement we didn’t really need to have. I was called into very senior-level meetings, whereas before a CEO or an MD of a company wouldn’t necessarily want to have a chat with us,” he said.
In many cases, local customers who were planning to expand or upgrade their technology footprint with Avaya wanted to make sure the company wasn’t going anywhere; that it would still be around to see out the duration of the next technology refresh cycle and beyond.
“The conversations ended up being great conversations,” Chidiac said. “We had large institutions, large organisations, both in private sector and in government sector who wanted to transact, and then did their due diligence after the Chapter 11 was announced, and came out and said, ‘we’re fine’.
“They continued to transact, they continued to buy millions of dollars’ worth of products and services from us,” he said.
According to Chidiac, the most challenging factor for the vendor locally during the Chapter 11 proceedings was not a breakdown in customer relationships – they actually largely became stronger – but the encroachment of competitors.
“The competitors obviously took to us, the sharks circled, if you like, they descended,” Chidiac said. “And I’m very proud to say, with the exception of some small opportunities I’m aware of, we held them off and we actually continued to grow our customers.”
And while Chidiac thinks that some partners were a little more cautious, just as some customers were, and might have slightly delayed some things they wanted to do, the vendor’s local business actually grew during the company’s bankruptcy and reorganisation in the US.
Part of that growth can be attributed to the product set that the company introduced prior to the Chapter 11 proceedings, but a large part is also down to the work Chidiac and his team in A/NZ undertook to reset and restructure the business.
This work was likely cemented by the increased volume of high-level conversations and the greater engagement between Avaya’s local leadership and decision makers among end customers in the wake of the Chapter 11 filing.
“Our customers, and particularly our partners, remained loyal,” Chidiac said.