Avaya has this week announced that it has reached global consensus (the “Global Resolution”) regarding the terms of a chapter 11 plan with its major creditors, including the Ad Hoc Group of First Lien Creditors (the “First Lien Group”), the Ad Hoc Group of Crossover Creditors (the “Crossover Group”), the Official Committee of Unsecured Creditors (the “Creditors’ Committee”), and Pension Benefit Guaranty Corporation (“PBGC”).
As a result of the Global Resolution, Avaya has filed a Second Amended Plan of Reorganisation (the “Second Amended Plan”) which, among other things:
(a) increases recovery for holders of Second Lien Notes Claims to 4.0% of Reorganised HoldCo Common Stock, and distributes warrants for an additional 5.0% of Reorganised HoldCo Common Stock to holders of Second Lien Notes Claims;
(b) reduces the distribution of Reorganised HoldCo Common Stock to holders of First Lien Debt from 91.5% to 90.5%;
(c) increases PBGC’s proposed cash recovery from $300 million to $340 million and reduces PBGC’s recovery in the form of Reorganised HoldCo Common Stock from 7.5% to 5.5%; and
(d) reduces recoveries available to holders of General Unsecured Claims to $57.5 million. Avaya has also entered into a plan support agreement with members of the Crossover Group. As a result, the Second Amended Plan is now supported by holders of more than two-thirds of Avaya’s First Lien Debt and more than two-thirds of Avaya’s Second Lien Notes.
Avaya has also filed a Disclosure Statement Supplement and, subject to customary approvals, will distribute that supplement to voting creditors. Additionally, Avaya has filed a request for an updated confirmation schedule to accommodate this resolution. Subject to those approvals, including confirmation of the Second Amended Plan, Avaya expects to complete its restructuring and emerge from chapter 11 protection in 2017.
Avaya also announced today that it 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 & Co. and Citibank, N.A.
Avaya projects to have $2.925 billion of funded debt and a $300 million senior secured asset-based lending (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.
