Ma Bell Great-Grandchild Avaya Files For Bankruptcy

Burdened by debt since its private equity buyout a decade ago, Avaya has filed for Chapter 11 bankruptcy.  The telecommunications software and hardware company posted a loss of $750 million for its most recent fiscal year. It is burdened by $6.3 billion in debt and $400 million in annual interest expense.

“Avaya’s current capital structure is over 10 years old and was put in place to support our business model as a hardware-focused company, which has evolved significantly since that time,” said Chief Executive Officer Kevin Kennedy. “Now, as a result of the terms of Avaya’s debt obligations and the upcoming debt maturities, we need to recapitalize the company.”

Avaya was spun off from Lucent in October 2000. Lucent, which later merged with Alcatel and was then acquired by Nokia(NOK), was spun out of the old AT&T(T) in 1996. The current AT&T is actually the former Southwestern Bell, which, as SBC Communications, in 2005 purchased the AT&T it had been spun off from in 1983 and took its former parent’s name. Got that? Good, now try to figure out your cost basis on any of this if you held AT&T stock prior to the breakup and DRIPped it and its successors for the next 30 years. Ouch. Do yourself a favor and donate the appreciated stock.

In any case, sad to see Avaya enter bankruptcy, hopefully a restructuring will allow this company to continue its storied legacy.

Disclosure: The author holds shares of T