Mitel has confirmed it has filed for Chapter 11 bankruptcy in the Southern District of Texas.
The company statement said it had the support of a majority of its existing lenders, with $124.5 million in new financing also made available.
$60 million of new money debtor-in-possession (DIP) financing has been to bolster the business through the restructuring process. Once approved by the Court, the DIP financing and Mitel’s existing working capital will provide liquidity to support day-to-day operations during the Chapter 11 process.
Mitel has also received a commitment for $64.5 million of new exit financing to support its go-forward operations.
Tarun Loomba, chief executive officer, Mitel, said, “We are confident the steps we are taking to optimise our capital structure will make us a stronger company primed for efficient and sustainable growth. Our strengthened capabilities at the end of this process will ensure our ability to continue to support customers and partners with innovative solutions, incorporating emerging technologies, and meeting their evolving needs for secure, reliable communications solutions for years to come.
“We look forward to becoming an even stronger vendor to our customers through this process, better positioned to power their most meaningful connections and to address the increasing preferences for hybrid communications solutions, globally.”
Mitel has said that its operations outside of the US, Canada, and select business segments in the UK are not included within the Chapter 11 filing. Its global business will operate as usual.
Dom Black, principal analyst at Cavell, explained that the Chapter 11 filing may prompt customers and partners to reassess their supplier portfolio, potentially leading to churn.
He added, “Expect to see Zoom, as Mitel’s exclusive UCaaS offering, and Genesys, which was recently positioned as Mitel’s partner for those looking at a cloud-first CX strategy, using this to accelerate conversations with customers. Competitors will likely frame this as further evidence of on-premise decline, reinforcing cloud as the default deployment model for many businesses.
“Although we are seeing continued move to the cloud for businesses of all sizes, there is certainly a role for hybrid deployments in larger organisations. Vendors like Avaya, Mitel and Cisco are the only vendors who are able to deliver on-premise solutions on a global basis so the options are limited for customers who want to take this approach.
“Mitel through its partnerships is able to deliver on this hybrid vision and will hope that Chapter 11 will allow them to free up cash that was being used to finance debt to start to be used for innovation and GTM activities.”
Mitel is represented by Paul, Weiss, Rifkind, Wharton & Garrison LLP as legal advisor, FTI Consulting as financial advisor, and PJT Partners LP as investment banker.