A U.S. court has approved a restructuring plan that will see Mitel slash its debt by more than a billion dollars under a new ownership group. The Ottawa-based telecommunications equipment company said last week the U.S. Bankruptcy Court for the Southern District of Texas has given it the go-ahead to enter into a prepackaged agreement […]
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A U.S. court has approved a restructuring plan that will see Mitel slash its debt by more than a billion dollars under a new ownership group.
The Ottawa-based telecommunications equipment company said last week the U.S. Bankruptcy Court for the Southern District of Texas has given it the go-ahead to enter into a prepackaged agreement with a group of senior lenders, certain junior lenders and other investors to recapitalize its debt.
The plan will reduce Mitel’s debt by about US$1.15 billion and cut its annual cash interest expense by US$135 million.
The company said it has received a commitment for $60 million of new money debtor-in-possession financing from some of the lenders to help fund its day-to-day operations as it goes through the restructuring process.
In addition, Mitel said it has received a commitment for US$64.5 million in new exit financing once the process is complete.
The court decision comes after Mitel filed for creditor protection in the United States last month. The firm’s Canadian entity said in March it was also seeking recognition of the U.S. proceedings under Canada’s Companies’ Creditors Arrangement Act.
In an updated fact sheet published on its website last Thursday, Mitel said ownership of the company will “transition” from Searchlight Capital Partners, which bought the firm in 2018, to the new group of lenders. Mitel also said a new board of directors will be appointed, but the company does not expect any changes to its leadership team as a result.
Mitel said it expects the restructuring process to conclude “within the next several months or sooner.” It described the lenders as a “group of financial institutions,” adding many of them are “well-established investment firms” that are familiar with its products, services and business strategy.
In a news release last week, Mitel CEO Tarun Loomba said gaining court approval for the restructuring plan is a “major milestone” for the company.
“With a more efficient capital structure in place, we’re well-positioned to accelerate growth and sharpen our focus on delivering flexible, secure, and mission-critical communications solutions,” Loomba said.
“We look forward to completing this process in the near term and to emerging as an even stronger vendor, employer, and business partner – continuing our leadership in hybrid communications for years to come.”
Founded by entrepreneurs Terry Matthews and Michael Cowpland in 1973, Mitel was acquired by Searchlight Capital Partners for US$2 billion and taken private in 2018.
While the firm is still headquartered in Kanata, all but about 300 of its more than 5,400 employees were located outside of the National Capital Region as of 2024.
Mitel has made several major moves in the past few years to try to grab a bigger share of the global unified communications sector, which was valued at more than US$113 billion last year and is expected to grow at least another 17 per cent by the end of the decade, according to Forbes.
The company acquired European telecom giant Unify in October 2023, a transaction that boosted its global user base from 35 million to 75 million. It also did a series of smaller deals last year and struck a partnership with Zoom, giving Mitel customers access to the video communications giant’s full platform.
Even still, Mitel continued to struggle. In a declaration filed with the Texas court last month, the company said it “experienced a confluence of industry and other external headwinds” that created “unanticipated costs” and “adversely impacted” its operations and liquidity.
Mitel said the shift to remote work during the pandemic dampened demand for its solutions, which were tailored to an “in-office environment.” The company also said supply chain disruptions drove up production costs for its hardware, leading to further liquidity challenges.
