Avaya, which lists GSO Capital Partners as a creditor, has sought court protection to cut its $6.36 billion of debts.
The Santa Clara, California-based telecommunications company submitted a Chapter 11 petition in a federal Manhattan bankruptcy court on Thursday.
It also filed a request to tap a $725 million loan to refinance a portion of its debt and fund its business while in bankruptcy. Avaya is a portfolio company of Silver Lake and TPG Capital, which the two private equity firms acquired in an $8.3 billion deal in 2007.
GSO’s Senior Floating Rate Term Fund both hold term loan B debt, according to regulatory filings submitted in November to the US Securities and Exchange Commission.
Avaya ran into trouble, like nearly all businesses, during the financial crisis but never fully recovered. Eric Koza, a managing director at turnaround advisory firm Zolfo Cooper who is Avaya’s chief restructuring officer (CRO), said in court papers the debtor tried to “reinvent” itself as a software and services company.
Avaya’s revenue suffered as it shifted business models. The company cut costs, saving $700 million since fiscal year 2014, as it looked to deal with mounting financial problems, which include $617 million of debt maturing in October.
Koza also said the company has engaged its creditors, which organised into an ad hoc group of first lien lenders and a crossover group of first and second lien debtholders. In court papers, the CRO said no deal has been reached.
A source said Avaya is still in talks with its creditors over a potential restructuring deal. The Wall Street Journal reported the parties are hashing out a solution that could involve creditors swapping their debt for equity.
GSO declined to comment.