The restructuring plan shrinks Mitel’s debt to US$160-million from US$1.15-billion and cuts its annual cash interest expense by US$135-million.Kris Tripplaar/The Canadian Press
Communications technology stalwart Mitel Networks Corp. has emerged from creditor protection with significantly reduced debt and interest costs, plus US$125-million in new funding.
“Today marks a fresh start for Mitel,” company chief executive officer Tarun Loomba said in a news release. “With the weight of legacy debt lifted, we are focused on accelerating our hybrid communications leadership.”
The Ottawa company’s prepackaged restructuring plan, supported by most of its lenders, was approved in April by the U.S. Bankruptcy Court for the Southern District of Texas, a month after Mitel filed for Chapter 11 protection (the company’s Canadian subsidiary also filed for relief under the Companies’ Creditors Arrangement Act to recognize the U.S. case as a “foreign main proceeding”). The plan shrinks Mitel’s debt to US$160-million from US$1.15-billion and cuts its annual cash interest expense by US$135-million.
Mitel files for creditor protection with restructuring plan aimed at ending chronic liquidity woes
Mitel has 70 million end users in 100-plus countries and thousands of employees, mostly in the United States and Canada, and about US$1-billion in annual revenue. The company, founded in Ottawa in 1973 by Terry Matthews and Michael Cowpland, has struggled for years. After Mr. Matthews invested in Mitel a second time in 2000, it became a consolidator of the declining market for on-premises communications systems for medium-sized enterprises.
Mitel went public for a second time in April, 2010, but struggled to create shareholder value. It was shifting into the growing business of cloud-based communications when Toronto private equity firm Searchlight Capital Partners LP bought Mitel for US$2-billion in 2018.
In its Chapter 11 filings, Mitel blamed its woes on a combination of industry and external factors. Mitel invested in unified communications delivered over the internet after the buyout but fell behind innovative rivals in video and chat-based offerings. The COVID-19 pandemic hurt demand for its traditional office-based telecommunications products and services, and related global supply chain interruptions led to rising costs for its telephony hardware.
Mitel tried to shift its business to meet the new challenges of supporting hybrid work arrangements, but its liquidity was constrained and a short-lived partnership with a rival was soon plagued with disputes.
A 2022 recapitalization intended to address liquidity issues prompted some junior lenders to sue Mitel and other lenders for violating their rights. The restructuring deal included an agreement to settle that litigation.