Investment banks backing voice and data comms biz Azzurri have agreed to write off three quarters - £78m - of debts owed to them by the integrator in a bid to clean up its balance sheet and gear up for expansion.
This leaves Azzurri owing £45m (£25m interest bearing) to the seven-strong financial syndicate, which includes Barclays Converted Investments, Allied Irish Bank and the Bank of Ireland.
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A joint venture between Goldman Sachs and EPB called Candlewick has bought out Lloyds' shareholding in Azzurri as part of the new agreement.
"Going forward I could not have carried a £103m balance sheet when … trying to grow the business," CEO Vim Vithaldas told The Channel.
He added that Azzurri's debt holders and the shareholders are one and the same, which made conversations about the write down easier to have. Accepting a big loss is never easy for investors to swallow.
The loans owed to the banks were due to be repaid by next summer – but under the new deal, Azzurri has until September 2016 to pay off its creditors.
The debt-to-earnings ratio carried by West Midlands-based Azzurri fell under the spotlight earlier this year, when sources told us the firm was approaching other integrators/ resellers to source products amid suggestions it was running dry on distie credit – an allegation the company dismissed at the time.
The parent company Azzurri Holdings turned over £126m in fiscal '12 ended June and made a profit of £5.5m, but finance costs of £23.5m left a net loss of £18m.
Interest repayments will now fall to a quarter of the previous level which makes them more manageable.
Vithaldas told us its debt burden did not cause problems with suppliers and the business had explained to customers who contacted it about the financial profile that Azzurri had the support of its backers.
Clearly being highly geared had its limitations, restricting the ability of management to invest in new areas. As part of the latest refinancing package Azzurri has been given £3m to invest in its Intelligent Cloud Optimised Network.
This is a hosted telephony platform offering voice-as-a-service, but it can go from basic functions to a fully specified contact centre application on a multi-tenanted basis. The target market is customers with between 250 and 1,000 seats, and the service will launch next year, though punters are being signed up already, Azzurri claimed.
"Azzurri and its competitors have a very limited offering in that [cloud] arena," said Vithaldas. "We talk to customers and if they've got a couple of million pound cheque to write, great, we'll talk to them. If they haven't, everyone walks away."
He said Azzurri's revenues will likely shrink as it shifts more customers to the “as-a-service” model, with business users paying for a contract over three years rather than a large upfront injection of capital.
The plan is also to push more cross-selling across the group, said Vithaldas.
A new chairman, Steve Andrews, is coming aboard from 25 October to replace Keith Taylor, who pitched up at Azzurri along with Vithaldas in December 2011, at the behest of the company's financial backers.
Vithaldas told us Taylor's skills were in "highly leveraged and turnaround businesses" but that he needs an industry veteran to "bounce ideas off" and "create a platform for growth".
Most recently, Andrews was group MD for mobility and MD for UK retail products at BT.
The latest refinance is the second since the end of calendar '11 when its banking syndicate removed former VC backer Silverfleet and effectively wrote off £224m in unpaid interest, carrying forward losses, bonds and loans to £103m.
Vithaldas said Azzurri, whose customers include Seven Trent Water, the Department for Transport and bin bods Biffa, now has a three year plan to execute.
"This [refinance] was a real vote of confidence by that syndicate," he told us. ®