Mitel Networks: $1.15B Prepackaged Plan Confirmed in 39 Days

MLN US HoldCo LLC, the U.S. holding company for business-communications provider Mitel Networks, filed a prepackaged chapter 11 on March 9 and March 10, 2025 in the U.S. Bankruptcy Court for the Southern District of Texas (Houston Division), lead case number 25-90090. The filing arrived with a Restructuring Support Agreement already signed by the company's major lender groups and a plan designed to cut roughly $1.15 billion from a $1.31 billion funded-debt load by converting senior secured claims into equity of the reorganized enterprise.

The case ran on a prepackaged timeline. Judge Christopher M. Lopez confirmed the plan on April 17, 2025 — 39 days after the petition — over an objection from the U.S. Trustee, and the company emerged on June 20, 2025, with a final decree closing the cases three days later. Searchlight Capital Partners, which had controlled Mitel since a 2018 leveraged buyout, saw its equity cancelled, while the priority and non-priority senior lender classes took control of the reorganized company.

Debtor	MLN US HoldCo LLC (Mitel Networks; jointly administered)
Court	U.S. Bankruptcy Court, Southern District of Texas (Houston Division)
Case Number	25-90090
Petition Date	March 9–10, 2025
Plan Type	Joint Prepackaged Chapter 11 Plan of Reorganization
Confirmation Date	April 17, 2025
Effective Date	June 20, 2025
DIP Facility	$131.0 million ($69 million new money plus a $62.0 million roll-up of Priority Lien loans); SOFR + 8.00% or ABR + 7.00%

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From Searchlight's 2018 Buyout to Prepackaged Filing

Mitel sells on-premise, cloud, and hybrid business-communications systems — telephone hardware, software, and subscription and support services — to customers across healthcare, hospitality, education, financial services, government, and other sectors. For fiscal year 2024, the company reported approximately $426 million in software and subscription revenue (about 43% of the total), roughly $276 million in professional and support services (28%), and about $205 million in hardware (20%). At the petition date it employed approximately 760 people, supplemented by about 57 independent contractors and 162 temporary staff.

Searchlight Capital Partners acquired Mitel in a 2018 leveraged buyout valued at approximately $2 billion. Through a chain of holding companies, funds managed by Searchlight held 99.89% of the ultimate Cayman Islands parent, "TopCo," which in turn owned the English holding company MNIL and the Canadian operating subsidiary, Mitel Networks Corporation.

Janine Yetter, Chief Financial Officer of Mitel (Delaware), Inc., attributed the company's distress to persistent liquidity pressure from the upfront cost of optimizing operations, shifting capital toward new market opportunities, debt-service obligations, inflationary pressures, and a material increase in interest rates. By November 2024, management concluded that the company could neither refinance its existing funded indebtedness nor service its interest expense beyond the first quarter of 2025, and that it needed a meaningful deleveraging transaction to right-size the balance sheet. The company filed to cut roughly $1 billion of debt with creditor support already in hand.

Capital Structure and the $1.31 Billion Debt Stack

Mitel entered chapter 11 with approximately $1.31 billion of secured funded debt layered across eight instruments with distinct lien priorities. The result of the 2018 buyout and a 2022 liability-management transaction, the structure split the senior creditor group into priority, second-lien, and third-lien tranches, with two legacy facilities ranking junior to all of them.

Facility	Outstanding	Lien Priority	Maturity
Swiss ABL Loans	$3 million	Separate collateral package	May 2027
Non-Swiss ABL Loans	$14 million	Separate collateral package	May 2027
Priority Lien Term Loans	$156 million	1st among Senior Loans	October 2027
Incremental Revolving Loans	$65 million	1st among Senior Loans	November 2025
Second Lien Term Loans	$576 million	2nd among Senior Loans	October 2027
Third Lien Term Loans	$157 million	3rd among Senior Loans	October 2027
Legacy Senior Term Loans	$235 million	Junior to Senior Loans	November 2025
Legacy Junior Term Loans	$108 million	Junior to Senior Loans	November 2026

The two ABL facilities — $3 million of Swiss ABL loans and $14 million of non-Swiss ABL loans — sat outside the Omnibus Intercreditor Agreement on a separate collateral package and were the only funded debt that survived the restructuring intact. Within the Senior Loans, the $156 million Priority Lien Term Loans ranked first, followed by $576 million of Second Lien Term Loans and $157 million of combined Third Lien Term Loans, all maturing in October 2027. The $65 million Incremental Revolving Loans shared first priority but matured in November 2025. Ranking below the entire Senior Loan stack were $235 million of Legacy Senior Term Loans and $108 million of Legacy Junior Term Loans. This layered priority scheme determined which creditors received reorganized equity and which were left out of the money.

DIP Financing and the $62 Million Roll-Up

To fund the cases, the debtors obtained a $131,029,800 debtor-in-possession facility combining $69 million of new-money term loans (inclusive of fees and premiums payable in kind) with a $62,029,800 roll-up of prepetition Priority Lien loans into DIP obligations. The court entered an interim DIP order on March 11, 2025, and a final order on April 1, 2025. S&P rated the new-money DIP term loan, reflecting the facility's first-priority position in the reorganized capital structure.

The DIP loans priced at the borrower's election at SOFR plus 8.00% or ABR plus 7.00%, payable in cash, with Acquiom Agency Services LLC and Seaport Loan Products LLC serving as co-administrative agents. The DIP motion provided for a 12.0% backstop premium on the aggregate new-money term loans, payable in kind, and set an outside maturity at the earliest of July 3, 2025, the effective date of a chapter 11 plan, the consummation of a sale of substantially all assets, or acceleration of the DIP obligations. As adequate protection, the final order granted the prepetition secured parties replacement liens, superpriority administrative-expense claims, authorization to use prepetition cash collateral, and protection against any diminution in the value of their collateral.

Prepackaged Plan and Equitization of Senior Debt

The confirmed plan delivered approximately $1.15 billion of balance-sheet deleveraging by converting the senior secured claims into the equity of the reorganized company. Holders of Class 4 Priority Lien Claims received a pro rata share of 66.7% of the New Common Equity, subject to dilution, in addition to the $62 million of Priority Lien loans that were rolled up and equitized through the DIP. Holders of Class 5 Non-Priority Lien Term Loan Deficiency Claims received a pro rata share of the remaining 33.3% of the New Common Equity, subject to dilution.

The reorganized debtors incurred an Exit Term Loan Facility in two tranches on the effective date: $20 million of Tranche A-1 Term Loans and $123.75 million of Tranche A-2 Term Loans. The Tranche A-2 loans comprised $69 million of converted DIP new-money term loans, $51 million of new-money Tranche A-2 term loans, and $3.75 million of incremental Tranche A-2 term loans issued as fee consideration. Consenting junior lenders received $5 million in fee consideration on the effective date — $1.25 million in cash plus $3.75 million of the incremental Tranche A-2 term loans.

Most other classes rode through unimpaired. Class 3 ABL Loan Claims were reinstated, with the ABL facilities continuing in full force under amended and restated credit agreements and a cash consent fee paid to the consenting ABL lender; Class 1 Other Secured Claims, Class 2 Other Priority Claims, and Class 6 General Unsecured Claims were reinstated or paid. Class 9 Existing Mitel Interests — Searchlight's equity — was deemed to reject and received no recovery. The Restructuring Support Agreement had been signed before filing by holders of 100% of the ABL Loan Claims, 72.1% of the Priority Lien Claims, and more than 81.1% of the Non-Priority Lien Term Loan Deficiency Claims. Final balloting confirmed near-unanimous support: Class 4 accepted with 99.3% of holders and 95.4% of dollars voting in favor, and Class 5 accepted unanimously across more than $1.0 billion of claims. Following the effective date, S&P Global Ratings assigned a 'CCC+' rating with a negative outlook to the reorganized company, noting that the restructuring reduced total funded debt to approximately $161 million — an 88% reduction from the prepetition load — while citing ongoing liquidity risks.

U.S. Trustee's Release Objection and the Purdue Challenge

The Region 7 U.S. Trustee filed the case's lone confirmation objection on April 10, 2025, arguing the plan was patently unconfirmable because of its third-party releases and related injunctions. The objection invoked the Supreme Court's decision in Harrington v. Purdue Pharma L.P., contending that the Bankruptcy Code does not authorize non-consensual third-party releases and that the plan's "opt-out" mechanism — deeming consent for parties who failed to affirmatively opt out — could not establish the consent that state contract law requires, particularly for non-voting classes that received only a release opt-out form. The U.S. Trustee also challenged the plan's "gatekeeper" provisions, which required bankruptcy-court approval before pursuing claims against released or exculpated parties, as inconsistent with Purdue and Fifth Circuit precedent, and objected that the releases reached unknown claims and lacked a carve-out for governmental police and regulatory claims. The argument tracked the U.S. Trustee's broader position that the plan was unconfirmable as drafted.

The bankruptcy court overruled the objection and confirmed the modified plan, finding the third-party release consensual rather than imposed. The court relied on the conspicuous, boldface release language appearing in the plan, disclosure statement, ballots, and notices; the actual notice given to releasing parties (with publication notice for unknown parties); and the instruction that parties would be deemed to consent unless they checked the opt-out box and returned it by the voting deadline. The release also excluded post-effective-date obligations, distribution and employment-agreement rights, confidentiality and non-compete obligations, and claims for actual fraud, gross negligence, willful misconduct, or criminal conduct.

2022 Uptier Transaction and Ocean Trails Litigation

Mitel's 2022 liability-management transaction, which issued the new "Senior Loans" to address short-term capital constraints, had drawn litigation from junior lenders who alleged it violated the junior credit agreements — one of the uptier disputes that became common after similar transactions across the leveraged-loan market. The challenge, brought by Ocean Trails CLO VII and others against MLN Topco, reached the New York Appellate Division, First Department, which on December 31, 2024 ordered dismissal of all counts, finding that the 2022 transaction complied with the junior credit agreements.

The Restructuring Support Agreement contemplated a consensual resolution of the remaining 2022 transaction litigation, with the parties agreeing to inform the New York Court of Appeals of a settlement. Bloomberg reported at confirmation that the restructuring's approval also resolved the uptier suit.

Cross-Border Recognition and Estate Professionals

Because Mitel Networks Corporation is a Canadian entity, the debtors commenced parallel recognition proceedings under Canada's Companies' Creditors Arrangement Act in the Ontario Superior Court of Justice (Commercial List) on March 10, 2025. The recognition motion sought to have the U.S. chapter 11 cases recognized as the foreign main proceeding, with FTI Consulting Canada serving as Information Officer to report to the Canadian court and coordinate relief over the Canadian debtor.

On the U.S. side, the debtors retained Paul, Weiss, Rifkind, Wharton & Garrison LLP as lead counsel, Porter Hedges LLP as Texas co-counsel, PJT Partners LP as investment banker, FTI Consulting, Inc. as financial advisor, and Ernst & Young LLP and KPMG LLP for tax services. Final fee applications covering the March 9 through June 20, 2025 period reported $4.97 million in fees for Paul Weiss over roughly 2,977 hours and $1.69 million for FTI Consulting. The largest professional line item was PJT Partners' engagement-letter fee of approximately $11.5 million, which included a capital-raising fee tied to the DIP and exit financing, bringing total approved professional fees above $18.5 million for roughly three and a half months of work.

Key Timeline

Date	Milestone
March 7, 2025	Voting record date
March 9–10, 2025	Chapter 11 petitions filed; disclosure statement and original prepackaged plan filed
March 10, 2025	Canadian CCAA recognition proceedings commenced in Ontario
March 11, 2025	Interim DIP order entered
April 1, 2025	Final DIP order entered
April 3, 2025	Plan supplement filed
April 10, 2025	Voting and objection deadlines; U.S. Trustee objection filed
April 15, 2025	Modified prepackaged plan and confirmation brief filed
April 17, 2025	Combined hearing; plan confirmed
June 20, 2025	Effective date
June 23, 2025	Final decree closing the chapter 11 cases

Frequently Asked Questions

Who is the solicitation and tabulation agent for Mitel?

Stretto served as the solicitation and tabulation agent and filed the voting declaration certifying the balloting results across the impaired classes.

How much debt did the Mitel plan eliminate?

The plan delivered approximately $1.15 billion of balance-sheet deleveraging, reducing roughly $1.31 billion of prepetition funded debt by equitizing the Priority Lien and Non-Priority Lien Term Loan Deficiency Claims into reorganized equity.

What happened to Searchlight's ownership of Mitel?

Existing Mitel equity interests held through Searchlight's holding-company structure were classified in Class 9, deemed to reject the plan, and received no recovery. Control of the reorganized company passed to the former Priority Lien and Non-Priority Lien lender classes.

How long did the Mitel chapter 11 take?

The court confirmed the prepackaged plan 39 days after filing, on April 17, 2025, and the company emerged on June 20, 2025, with a final decree closing the cases on June 23, 2025.

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