Avaya has filed a chapter 11 reorganization plan the company says will significantly reduce Avaya's pre-filing debt, strengthening its balance sheet and improve financial flexibility and position it for long-term success.
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Under the proposed plan, which must be approved by the United States Bankruptcy Court for the Southern District of New York a number of actions are proposed, including:
- Avaya's pre-filing debt will be reduced by more than $4 billion;
- Avaya's restructuring will be achieved through a debt-for-equity exchange, in which certain secured creditors would acquire 100 percent of reorganized Avaya's equity;
- Avaya's general unsecured creditors will share pro rata in a cash pool;
- Avaya will continue to honor and maintain its qualified U.S. pension plans, which make up the vast majority of Avaya's pension obligations, following its emergence from bankruptcy;
- Avaya will continue to honor and assume its two collective bargaining agreements and all related agreements.
"We are pleased to have filed the Plan, which is a crucial step forward in our effort to recapitalize Avaya's balance sheet and create a stronger and healthier company that can create even more value for our customers," said Kevin Kennedy, Chief Executive Officer of Avaya in a statement. "Our normal business operations are running well, and we continue to sign significant customer renewals and new customer contracts. In addition, the Company's consolidated balance sheet now has more than $750 million in cash, reflecting DIP financing proceeds and positive cash flow from operations. We remain confident in our ability to maximize value for all of our stakeholders and to complete our balance sheet restructuring as soon as reasonably possible."
In January when it declared Chapter 11, Avaya reported $3.7 billion in in revenue for the year ended Sept. 30, 2016, down 9% from the previous year. It posted an operating loss of $262
“To understand how we arrived at this juncture, you need to start with Avaya’s capital structure, which was put in place 10 years ago to support a hardware-focused business model. During the past decade, our business model has evolved significantly – driven by changes in technology and customer expectations. The economic downturn that started in 2008 also had a dramatic impact on technology spending and the ways customers wanted to buy and deploy communications solutions,” Avaya corporate treasurer John Sullivan wrote in Network World about how Avaya arrived at Chapter 11.