Avaya on Chapter 11: 'Business as usual in LatAm'

Friday, April 21, 2017

In January this year, after months of speculation, US enterprise communications platform and telecommunications company Avaya filed for Chapter 11 bankruptcy protection in a US court.

Most recently, the company submitted to the same court a reorganization plan that seeks to cut its pre-filing debt by more than US$4bn through a debt-for-equity exchange.

In this interview, the company's VP of sales for the Americas International region, Galib Karim, talks about investment and explains how the bankruptcy proceedings will play out in local operations and just how healthy the company's finances are.

BNamericas: What does Avaya have in the pipeline for Latin America this year?

Karim: One of our priorities for Latin America in 2017 is to start penetrating our customer base with cloud solutions, meeting requests from many of our clients who are undergoing a digital transformation and want to have more flexible opex consumption models.

We're also partnering with some service providers, such as Telmex and Claro, to offer Unified Communications [UC] solutions in the cloud through a virtualized Avaya IP Office platform.

BNamericas: Just Telmex and Claro?

Karim: These are the only ones that have been made public. We're also partnering with service providers in Colombia, Brazil, Argentina and Puerto Rico, among others, deals for some of which were closed this fiscal year.

Then we have the offer of BPO for large enterprises. We've also just launched a full omnichannel platform and made the Equinox platform available to all regions, which integrates the entire communications of a company in one place and on any device.

We started a plan to consolidate all these clients on Equinox. So all these offerings are gathering momentum in the region this year.

BNamericas: The company is under judicial protection and recently filed a reorganization plan as part of the Chapter 11 process to tackle its high debt load. How does that situation affect the operational capacity of your business, especially in Latin America?

Karim: We filed for Chapter 11 at the end of January and the reorganization plan was filed last week. The filing and the reorganization plan are really focused on the debt. We haven't seen any impact on our operations during these months, at least not directly on our day-to-day operations.

The only Avaya entity that filed for Chapter 11 was the US one and its subsidiaries and any of the entities in Latin America aren't filing for similar processes in their countries. So it's still "business as usual" for us in Mexico, Brazil and all the other local markets.

The company continues working even through the Chapter 11 process. We're profitable, have great Ebitda and positive cashflow, so there really isn't a need to change our business model. The need is to resolve the debt we have at present and work out the company's capital structure.

The plan presented last week is totally consistent with what we announced back in January and with what we are aiming at for the company.

The next step is the court to review it with the creditors and approve it. What we expect is that by the end of the summer we will have come out of the Chapter 11 process.

In January and February we saw a slight impact on our business because, of course, many customers want to understand what's going on and many of them were uneasy about the news.

The thing is that, particularly in Latin America, the Chapter 11 procedure isn't as well-known as it in the US and Canada as a preventative tool. Here a judicial protection process like that is usually seen as synonym of a company going bankrupt or broke.

So we had to give lots more explanations in Latin America than in the US and Canada. But now customers are seeing that we're doing exactly what we said at the beginning.

BNamericas: Did clients stop or suspend any contracts?

Karim: Some of them held up some projects to see how the process was moving forward, yes, but we're not seeing them leaving or replacing us with another vendor. We've been very transparent with them about the objectives of Chapter 11 and what we're looking for since the beginning.

We now feel we're in very good position. We finished our quarter in very good shape and we're very positive about the final part of this process.

BNamericas: What's the current weight of Latin American operations in the company's total revenues?

Karim:  Latin America represents about 6% of our revenue, and the US and Canada around 50%.

BNamericas: And within this 6% how is the region divided? What are your main markets?

Karim: At present Mexico is the biggest market, followed by Brazil, Argentina and Colombia.

We have offices for those four plus Chile, Peru, Ecuador, Panama, Guatemala, Puerto Rico and Dominican Republic, in addition to from Miami, the hub for the region.