Telecommunications company Mitel Networks is poised to file for Chapter 11 bankruptcy protection imminently, according to individuals with direct knowledge of the ongoing deliberations.
The privately held Canadian company is currently engaged in intricate debt restructuring negotiations with its creditors, driven by persistent revenue declines and impending debt maturation. These details were disclosed by sources who requested anonymity due to the sensitive nature of the information.
Mitel’s debt instruments are experiencing unprecedented depreciation, with financial intermediaries effectively valuing the loans as negligible. The company’s $235 million first-lien term loan, scheduled to mature in December 2025, is currently trading at a fraction of a cent on the dollar, according to multiple market informants who spoke with Bloomberg.
The organization has enlisted the strategic advisory services of PJT Partners and FTI Consulting to navigate the complex restructuring process. Additionally, the prestigious law firm Paul Weiss Rifkind Wharton & Garrison has been retained to provide legal guidance on the planned financial manoeuvres.
Representatives from Mitel and its principal stakeholder, Searchlight Capital LP, have maintained a strategic silence, declining to provide commentary. Similarly, representatives from PJT, FTI, and Paul Weiss have opted not to address the matter, leaving the details shrouded in confidentiality.
Contested debt exchange
The potential bankruptcy filing emerges in the wake of a consequential New York state appellate court ruling that sanctioned a contentious debt exchange despite substantial objections from excluded lending parties.
The controversial financial restructuring encompassed a multifaceted loan arrangement, including a $156 million superpriority loan, a $575 million secondary loan, and a $124 million tertiary loan. According to a Moody’s Ratings report from November 2022, Mitel strategically utilized these proceeds to repurchase legacy debt at discounted valuations.
Dispossessed lenders mounted a legal challenge to the 2022 transaction, alleging fundamental breaches of the original loan covenants and violations of the implied contractual principles of good faith and equitable dealing. Ultimately, the court rendered a decisively technical interpretation of the loan agreements, ruling in favor of Mitel’s proposed restructuring strategy.