“This is the beginning of an important new chapter for Avaya,” said Jim Chirico, Avaya’s president and CEO. “In less than a year since the commencement of our chapter 11 restructuring, Avaya has emerged as a publicly traded company with a significantly strengthened balance sheet. Overall, we reduced our prior debt load by approximately $3 billion, and we exit today with more than $300 million in cash on our balance sheet. The reduction of our debt and certain other long-term obligations will also improve annual cash flow by approximately $300 million compared to fiscal 2016.”
“We have the flexibility we need to invest in the large and growing contact center and unified communications markets as we complete our transformation to a software, services and cloud solutions provider,” Chirico added. “With a new Board and leadership team firmly in place, Avaya is now well-positioned to execute on its growth plan and deliver the returns and value expected by our stakeholders.”
While the company has significantly reduced its debt, it still has nearly $3 billion in net debt. At the same time, it has nearly $300 million in annual cash flow. An author on Seeking Alpha has raised questions about patent litigation with Blackberry(BB) and disclosure of them. These concerns appear to us to be overstated.
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. It is good to see this storied name return to the public markets. If the company can use its cash flow to reduce its still large debt, equity holders stand to be rewarded handsomely.
Disclosure: The author holds shares in T
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