Mitel Expects to Emerge from Bankruptcy by End of Q2

Hybrid communications vendor Mitel, which recently received an approval for its reorganization plans from a federal bankruptcy court, has said that it will emerge from its Chapter 11 bankruptcy proceedings by the end of the second quarter this year.

Mitel applied in March for Chapter 11 relief in the U.S. Bankruptcy Court for the Southern District of Texas, citing its need to shed $1.15 billion in debt while cutting its interest expenses by about $135 million a year to gain a healthier long-term economic position in the marketplace.

Under the newly approved reorganization plan, Mitel will remove the debt and will also receive a new investment of $60 million in new money debtor-in-possession ("DIP") financing from lenders to bolster the business through the restructuring process. Also approved by the court was a commitment Mitel had for $64.5 million in new exit financing as part of the bankruptcy negotiations. Mitel’s operations outside of the U.S., Canada, and select business segments in the U.K. are not included in the Chapter 11 filing.

The company stated it expects to complete its financial restructuring and emerge from the court-supervised process following the completion of these financial transactions and after all required regulatory approvals are received.

Eric Hanson, Mitel’s chief marketing officer, told ChannelE2E that the bankruptcy court’s approval of its restructuring plan puts the company on a new course toward a healthier future. “Our debt will officially be reduced, the annual interest rates will be reduced, and the additional financing that the lenders put in for operational support in this transition will be available to us to drive the business plan,” said Hanson. “All of those things will be in place by the end of the second quarter.”

Hanson said that Mitel undertook its reorganization to cut its debt and smooth its business path, while also reworking its product and service strategies to help customers with their hybrid communications requirements in the marketplace.

The court approval of the restructuring plan came swiftly and with no disruption to the company’s business and operations, said Hanson. Some business partners were concerned when they heard about the proceedings following news reports, but Mitel quickly responded with written communication explaining what was happening, according to Hanson.

“There really has not been any disruption to business from that perspective,” he said. “This was really just about restructuring the debt, and the feedback from partners, similar to the customer feedback, has been very positive. Generally speaking, it has been overwhelming support for it,  especially when they see the stats around the debt and the relief around the annual interest payments and a level of excitement on the heels of all of the product announcements we have made over the last year.”

Mitel provides hybrid communications for some 70 million users across over 100 countries, according to the company.

"Mitel must prove itself now," Says Analyst

Shelly Kramer, founder and principal analyst at Kramer&Co., told ChannelE2E that Mitel’s quick court decision and fresh business outlook after the court proceedings are major benefits for the company.

“The approval of Mitel's restructuring plan is very good news for the company's channel partners, who account for some 85% of the company's sales,” said Kramer. “This was a smart financial move” to eliminate some $1.15 billion in debt and about $135 million in interest payments annually, and “it is also good news for customers, who should not feel any impact.”

At the same time, “Mitel’s access to nearly $65 million in exit financing will not only help support operations, but also help the company keep its laser focus on delivering the ultimate in customer lifecycle value, something Mitel is understandably quite proud of,” said Kramer. “Make no mistake, Mitel must now prove itself –to customers, channel partners, analysts, and beyond. However, this is a 50-year-old company with a strong industry track record, good brand recognition, and a well-established commitment to customers and growth. I am looking forward to good things ahead.”