Last week we reported that Mitel Networks was preparing to file for Chapter 11. Now the telecom company announces that it actually did so. Mitel entered into an agreement with its lenders to optimize its capital structure. And to restructure debt.
In 2018, Searchlight Capital Partners acquired Mitel and has been its majority shareholder ever since. However, Mitel agreed with an ad hoc group of lenders and other stakeholders to implement a new ownership structure for this week’s financial transaction, so Searchlight no longer owns it.
Mitel will implement the restructuring according to a pre-approved plan. In addition, it is filing voluntary requests for debt relief under Chapter 11 of the Bankruptcy Code. Historically, Chapter 11 restructuring was a lengthy process that could temporarily shut down the company’s operations until the proceedings were completed.
In recent years, both Avaya and C1 (formerly ConvergeOne) have used this process to enter and exit Chapter 11 without virtually any interruption to their business operations. In Mitel’s case, there is no impact on customers, partners, or employees. One expects to complete the process within 60 to 90 days.
New financing
Once the financial transaction is completed, Mitel’s debt will be significantly reduced. Some lenders have committed to $60 million in new financing to support the company during the restructuring process.
Once the court approves the committed financing and Mitel’s existing working capital will fund day-to-day operations during the Chapter 11 process. Mitel has also received a $64.5 million commitment of new exit financing once the plan is implemented. The new debt will be used to support future operations.
Strong Mitel business operations
Mitel’s business operations are currently strong. The company was experiencing an upturn as its hybrid cloud strategy gained a foothold. The company has a strong product roadmap and has built a hybrid cloud portfolio, with partnerships with companies such as Zoom and Genesys for customers who want a SaaS solution. Although the trend for unified communications and contact centers is shifting to the cloud, there is still strong demand for on-premises solutions.
With Avaya pulling out of the midmarket and focusing only on large customers, Mitel remains the only provider of on-premise/hybrid cloud solutions for the midmarket, giving it a huge customer base.
Increased interest in hybrid cloud
SiliconANGLE spoke with Mitel CEO Tarun Loomba about the restructuring. Who indicated that the financial steps enable the company to continue to innovate and support the needs of customers and partners with secure, reliable communications systems.
Loomba further shared that Mitel’s strategy is to lead the hybrid communications market by leveraging its significant customer base and attracting new customers with innovative hybrid solutions and services.