Telecom company Mitel files for bankruptcy to cut $1 bln in debt
March 10 (Reuters) - Telecommunications company Mitel Networks Corporation filed for Chapter 11 bankruptcy protection in Texas late Sunday, seeking to complete a restructuring that will eliminate $1.15 billion in debt.
Mitel entered bankruptcy with $1.3 billion in debt. The company's debt has hampered its ability to quickly adjust to changing demands as businesses shifted to remote and hybrid work in the wake of the COVID-19 pandemic, according to court documents filed Monday.
Before the pandemic, Mitel focused on providing communication services such as voice calls, video conferencing, instant messaging, and email for businesses in an office setting. The pandemic drove a rapid shift to remote work, decreasing demand for in-office solutions and creating a wave of new competition in remote telecommunications services, according to Mitel.
Mitel undertook several transactions to compete in the new environment, including a 2023 acquisition of Unify Inc., the telecommunications business of the France-based Atos Group. But Mitel ultimately fell behind other market competitors in driving innovation around video and chat-based collaboration, according to its court filings.
Mitel has the support of its lenders for a 'prepackaged' bankruptcy that should be quickly approved in court, and the company intends to fully repay debts owed to its vendors and junior creditors, the company said.
The restructuring will also resolve litigation between the company's lenders, some of whom had sued over a 2022 debt refinancing that privileged some lenders over a minority faction that received less-favorable terms. A New York state court ruled in December that the minority lenders' lawsuit should be dismissed, but those lenders had appealed the decision.
Mitel, which provides on-premise, cloud, and hybrid telecommunication services to business customers in 146 countries, is owned by private equity firm Searchlight Capital Partners. Searchlight acquired Mitel in 2018 in a transaction in a $2 billion leveraged buyout that left the company with about $1.3 billion in debt.
Mitel had about $1 billion in revenue in 2024, and the debt restructuring will allow the company to cut its annual interest costs by $135 million, according to court filings.
Mitel was founded in 1972, and it is headquartered in Ottawa, Canada.
The case is In re: MLN US HoldCo LLC et al, U.S. Bankruptcy Court for the Southern District of Texas, No. 25-90090
For Mitel: Paul Basta, John Weber, Leslie Lieberman, and Sean Mitchell of Paul Weiss Rifkind Wharton & Garrison LLP
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