Avaya enters into a Plan Support Agreement with holders of over 50% of its first lien debt
Vendor files Confirmable Amended Plan of reorganisation and disclosure statement with support of major stakeholders
Seven months after Avaya Inc filed for Chapter 11 bankruptcy in the US, the vendor has revealed that it has entered into a Plan Support Agreement (PSA) with holders of over 50% of its first lien debt, including certain members of the Ad Hoc Group of First Lien Creditors.
In addition, the company has reached agreement with US Pension Benefit Guaranty Corporation (PBGC) to provide for the termination of the company's obligations under the Avaya Pension Plan for Salaried Employees (APPSE) and the related transfer of those obligations to PBGC, with the support of the Ad Hoc First Lien Group.
Avaya stated in a statement that it has filed an amended plan of reorganisation and disclosure statement reflecting the terms of these agreements.
As a result, once the company has received approval from the Court to solicit creditor votes and receives the requisite votes, the Amended Plan is confirmable. According to the company, key terms of the Amended Plan include: The reduction of Avaya's debt by more than $3bn from pre-filing levels; the settlement and transfer to PBGC of Avaya's obligations under the APPSE; Avaya's continued support of its obligations under the Avaya Pension Plan (APP); and initiation of steps to enable Avaya to emerge from chapter 11 as a public company.
"We are very pleased to have reached these agreements with these key stakeholders in our restructuring process, the Ad Hoc First Lien Group and PBGC," said Kevin Kennedy, president and chief executive officer, Avaya. "This is an important milestone in the Chapter 11 process and marks Avaya's progress toward our goal of emerging a stronger, more competitive company."
Kennedy added that: "We believe this is a positive and beneficial outcome for our stakeholders. With a creditor-supported and confirmable Plan of Reorganisation in place, we now have a clear and viable path to emerge from chapter 11 in the near term."
The PSA results from extensive negotiations among Avaya and members of the Ad Hoc First Lien Group. The holder parties who executed the PSA collectively hold over 50% of Avaya's first lien indebtedness. These parties have agreed, among other things, to support the restructuring transactions contemplated by the Amended Plan, vote in favour of the Amended Plan when solicited in accordance with applicable law and not take any action inconsistent with the PSA or the transactions contemplated thereby.
Fadi Hani, vice president, MEA, Avaya, said that while Avaya Inc has been working through the Chapter 11 process in the US, the Middle East and Africa business has progressed strongly.
"This agreement provides a clear and viable path to exit Chapter 11 in line with our strategy. This is an important milestone as we work to emerge as a strong and competitive company in the coming weeks," Hani said.
He added that: "Over the past two years, we have been vocal about the transformation of the Middle East and Africa business and we recognised the need to restructure in order to align to the demands of the regional market, to deliver the software and services that local organisations need, and ensure the success of our customers."
He explained that the transformation is proving positive and last year the company reported that Avaya Middle East and Africa closed its fiscal 2016 with its strongest quarter in 12 quarters. "I am pleased to note this progress has continued, with the local business to date," he reiterated. "We take great pride with the level of confidence and support that we continue seeing from our customers and partners in the Middle East and Africa."
Avaya said it will continue to work to build consensus and gain the support of other stakeholders. The vendor added that it will seek approval of its revised disclosure statement and the PSA at its scheduled court hearing on August 23, 2017.