Telecommunications firm Avaya announced on Monday that they now have a clear path to exit Chapter 11 bankruptcy by reaching an agreement with its senior creditors and the government’s pension insurer.
The arrangements could cut more than $3 billion from the $6.3 billion in debt Avaya had when it entered bankruptcy in January.
Avaya had faced challenges in attempting to transition from a company centered on hardware, and neglected to sell its call center business. Avaya said that it had backing from holders of over half of its $4.38 billion first-lien debt along with a settlement with the Pension Benefit Guaranty Corp to complete its underfunded salaried employee pension plan.
Kevin Kennedy, President and Chief Executive Officer of Avaya
Kevin Kennedy who has been Avaya’s President since January 2009 stated that:
“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.”“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. Further, we believe this is a positive and beneficial outcome for our stakeholders.With a creditor-supported and confirmable Plan of Reorganization in place, we now have a clear and viable path to emerge from chapter 11 in the near term.”Source: Commstrader
Avaya & Pension Benefit Guaranty Corp
The Santa Clara, California-based company has also struggled with its pension obligations.
The PBGC has said Avaya’s hourly workers plan was underfunded by $660 million and its salaried workers plan was underfunded by $1.24 billion.
According to court documents Avaya will pay the PBGC $300 million and give it 7.5 percent of the stock in the reorganized Avaya in return for transferring obligations for the salaried plan to the PBGC
Key Points:
- First lien debt holders receive payment before all other debt holders.
- The reduction of Avaya’s debt by more than $3 billion from pre-filing levels.
- This restructuring involves three different Avaya pension plans.
- 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”).
- Initiation of steps to enable Avaya to emerge from chapter 11 as a public company.
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