Avaya has received confirmation from the court of its Plan of Reorganisation on an accelerated basis which paves the way to a fresh start.
The restructuring plan put forward to the U.S. Bankruptcy Court for the Southern District of Texas will wipe off over 75% of Avaya’s total debt, increase its liquidity position to more than $650 million, and lower its net leverage to below 1x.
The cloud communications solutions provider has continued serving its customers and partners throughout the process of filing for bankruptcy, and it plans to emerge with “significant financial strength” to invest in its business.
Alan Masarek, Avaya’s Chief Executive Officer, said:
“We embarked on this process with a clear goal – to create a stronger financial foundation that enables us to build on our competitive industry position, strengthen our partner ecosystem and better meet the needs of our customers with further investment in our cutting-edge, long-range product roadmaps.
“I am pleased with our progress as we prepare to complete this critical step of our business model transformation, and I am grateful for the confidence of our customers, partners, team members, and investors along the way.”
Avaya’s Plan of Reorganisation, announced in February, is supported by the majority of the company’s stakeholders, which include prepetition lenders and strategic partners.
Following the bankruptcy claim, Avaya will continue to receive the backing of its current lenders. These include Apollo Global Management, Inc and Brigade Capital Management, LP, which have both invested incremental capital throughout the process to help ensure Avaya’s survival.
Masarek added: “The resounding support for our restructuring plan is a testament to the significant value our investors see in our business and the solutions we provide, and we look forward to capitalizing on the opportunities ahead.
“With considerable resources to execute on our R&D initiatives and cloud communications roadmap, we intend to accelerate the delivery of exceptional experiences to our customers and partners.”
The Avaya Sagas
A cloud of uncertainty, which has hung over Avaya for many months, could be nearing an end.
It emerged in December last year that Avaya could be facing bankruptcy for a second time, following a report by the Wall Street Journal which stated there was “substantial doubt about its ability to continue as a going concern in light of debt maturity next year”.
In September 2022, Avaya announced it was cutting jobs in order to save as much as $250 million annually.
Further back, in July 2022, Avaya removed its CEO, Jim Chirico, following a successive slide of quarterly results, culminating in a 90% drop in share price since the beginning of 2021.
What is a Plan of Reorganisation?
A Plan of Reorganisation (POR) is a document that details a company’s turnaround plan, following negotiations with creditors.
After filing for Chapter 11 bankruptcy, the U.S. Bankruptcy Code allows debtors a period in which they can submit a POR.
After a court approves a company’s POR, creditors vote on the proposed plan and, if the vote is carried, the court undertakes various tests of the plan to ensure it is viable.
If such a company successfully progresses through these stages, it will avoid liquidation and become a financially viable entity once again.
As part of a POR, companies must detail the ways in which they will right their balance sheets, normalise their debt-to-equity ratios, improve profitability, and address each class of claims.
