NewsUC&C5 Sept 2017 · 3 min read

The Latest on Avaya's Emergence from Chapter 11 Bankruptcy

Avaya recently announced that their amended chapter 11 plan would set aside $60 million for any unsecured creditors.

Customers, partners, and shareholders for Avaya have been celebrating recently, as the brand announced its next step plan for emergence from Chapter 11 bankruptcy. Now, the world-leading brand revealed that they would be filing an amended chapter 11 plan designed to help them set aside a pot of money - $60 million to be exact - for unsecured creditors in their network.

The revisions have already been approved by the unsecured creditor's committee according to Avaya, as well as their first lien creditors. This update will also remove the cap that the previous bankruptcy plan had implemented onto the recovery by unsecured creditors, and allow them to chose to take their payments in stock, rather than just cash.

Moving Out of Chapter 11

The U.S. subsidiaries of Avaya and the overarching corporation recently filed for chapter 11 bankruptcy protection in January of this year, in an attempt to help them reorganise some of their debt, and come out of 2017 stronger than ever. During the same day, the company also rejected a $3.9 billion bid for their call centre software business. The decision was made in order to support Avaya's choice to move from a "hardware" company to a business focused on software and services.

Under the previous proposition for emergence from Chapter 11, Avaya was looking to minimise their overall debt by around $4 billion through a debt-for-equity exchange. This would give first lien debt holders about $1.4 billion in cold-hard cash, or 95% of the reorganised holding company equity, and new secured debt. The structure outlined in the latest proposal would mean that first lien holders received a 95% recovery on about $4.4 billion worth of claims.

The Original Plan, and The Revisions

The plan for emergence, which was filed only a couple of weeks ago by Avaya, relied upon a global settlement capable of moving pension obligations in exchange for equity in the re-organised company, and $300 million. If the plan is confirmed, the Pension Benefit Guarantee Corporation would be responsible for over $1.2 billion in pension pay outs.

Originally, the emergency plan called for a cap on the recovery for every unsecured claim at 8.2%. That would mean that the unsecured claim total would reach about $305 million. However, Avaya was met with several concerns raised from their unsecured creditors committee about this cap, and as a result, they've chosen to make some changes, removing the gap, and setting aside $60 million for creditors. The new plan will also mean that creditors can choose how they want to receive their recovery - either in the form of shares or cash.

According to Avaya, the new plan will give them the full support of their unsecured creditors, and the brand is continuing to work alongside their other stakeholders to push more support for their journey outside of chapter 11. Avaya is hoping to have all their creditor votes received as soon as they start soliciting them; the deadline is 27th October.

The Avaya Story so far: