Avaya reached global consensus regarding the terms of a Chapter 11 plan with its major creditors, including the ad hoc group of first lien creditors, the ad hoc group of crossover creditors, the official committee of unsecured creditors and Pension Benefit Guaranty Corporation (PBGC).

As a result of the global resolution, Avaya has filed a second amended plan of reorganization which, among other things:

  • Increases recovery for holders of second lien notes claims to 4.0% of reorganized holdco common stock, and distributes warrants for an additional 5.0% of reorganized holdco common stock to holders of second lien notes claims
  • Reduces the distribution of reorganized holdco common stock to holders of first lien debt from 91.5% to 90.5%
  • Increases PBGC’s proposed cash recovery from $300 million to $340 million and reduces PBGC’s recovery in the form of reorganized holdco common stock from 7.5% to 5.5%
  • Reduces recoveries available to holders of general unsecured claims to $57.5 million

Avaya is launching an exit financing process secured by fully underwritten commitments. Subject to Bankruptcy Court approval, these commitments include $2.925 billion of funded debt, including a $2.425 billion term loan underwritten by a group of banks led by Goldman, Sachs and Citibank.

Avaya projects to have $2.925 billion of funded debt and a $300 million senior secured ABL facility available upon emergence from bankruptcy, a substantial reduction from the approximately $6 billion of debt on its balance sheet when Avaya commenced its financial restructuring. This revised capital structure is expected to save Avaya more than $200 million in annual interest expense compared to fiscal year 2016. The debt restructuring will also provide Avaya with longer dated debt maturities and improve its ability to pursue future growth opportunities as it emerges as a public company.

“The global resolution is one of the most significant milestones in our Chapter 11 process, and we are pleased to have gained the Crossover Group’s support for the second amended plan,” said Jim Chirico, Avaya’s president and CEO. “It was our goal all along to reach a plan of reorganization that is fully supported by all of our major creditor groups. With a consensus-backed Plan and exit financing commitments in hand, we are closer than ever to emerging as a stronger, more competitive company. These developments are good news not only for Avaya, but for our customers and partners as well.”

Centerview Partners and Zolfo Cooper were Avaya’s financial and restructuring advisors and Kirkland & Ellis is the company’s restructuring counsel. The first lien group is represented by Akin Gump Strauss Hauer & Feld and PJT Partners as legal and financial advisors, respectively. The Crossover Group is represented by Stroock & Stroock & Lavan and Rothschild as legal and financial advisors, respectively. The creditors’ committee is represented by Morrison & Foerster. Jefferies and Alvarez & Marsal North America, as legal, financial, and restructuring advisors, respectively. PBGC is represented by Dentons US and FTI Consulting as legal and financial advisors, respectively.

Santa Clara, CA-based Avaya provides a portfolio of software and services for contact center and unified communications—offered on premises, in the cloud or a hybrid.