keytapper

Great, thanks for your response. You sounds like someone who is on au fait with these kinds of deals so I'll ask you your opinion on who were the winners and losers here.

So, presumably TPG lose what ever the initially put in now that it has hit the wall. Does that mean that they will have lost money over the course of the investment or would they have found a way to slowly extract money from the quite reasonable revenue that Avaya was generating over the last 10 years? Their only regret being that they werent able to offload the company before it hit the wall. With the mortgage/LBO analogy: when the bank repossess the home it is theirs to manage. By what process does the venture guys give up ownership and wash their hands of the day to day operations?

Since this was a leveraged buyout presumably the big loser here would be who ever holds the bonds that were created to fund the buyout and whatever else debt the company holds. Is there anyway to know who they are and why they thought it was a good idea to put their money into this? Are likely to end up owners of this company after the bankruptcy is resolved?

I guess the employees will take a large hit here, layoffs all round and whatnot.

The leadership members that were put in to run the place: do they typically take any kind of a hit in scenarios like this? It seems common knowledge that KK was getting paid serious compensation for his time but it looks like the only downside for him is that he didnt get the big bonus for selling off the company. Can we expect a clearout at the top or is this up to the new owners who result from the chapter 11 process.

Here is where I am struggling with... did the venture guys actually make money in this case or did they make such a balls of it that they actually lost significant amounts of their own money? Would they have 'Looted' the place by paying out bonus to themselves as employees, could they have done this to such an extent that over time it covered the initial capital they put in to take Avaya over?

Thanks for your insight, I will check out your recommendation. As is the case with most things in finance, I'm sure if I scratch the surface there is a fairly straight forward explanation as to why things worked out the way they did. It is amazing how you can work at a place where the owners interests and the leadership goals might not be aligned to what you thought they were. There was a strange situation some months back where by the board filed a notice that if the company was bought they would each get juicy bonuses and even bigger ones if they were fired by the new owners. That was an interesting one.

"But this was a deal designed to fail from the start."

Can you elaborate on this further? I just made a comment earlier about how Avaya ended up in this situation and I have had a feeling, based on how the last few years have played out, that you might be right: I just dont understand how the owners could have run the company the way they did and make out with a profit.

I have been working at avaya for the last couple years and I have been scratching my head trying to understand how this company works and how it got into this situation. On one hand its a company thats hasn't made a profit in 10 years but on the other it takes in a billion every quarter. When you look at the numbers it turns out it is paying tens of millions to service the interest on its massive debt... it would be quite profitable if it was not for this. So where did the debt come from? Most of it seems to have come from the leveraged buyout it underwent 10 years back. So now they file for chapter 11 bankruptcy but who is getting burned here? Anyone who bought an avaya bond will lose out but what about the private equity company that owns the place? The way the company was allowed to grow its debt seems like they just didnt care as if it wasnt going to hurt them when bankruptcy finally beckons.