Avaya initiates prepackaged financial restructuring via Chapter 11

Avaya (AVYA) announced that it has entered into a Restructuring Support Agreement with overwhelming support of more than 90% of the Company’s secured lenders. Implementing the Financial Restructuring will accelerate Avaya’s ongoing business transformation, significantly enhance its ability to invest in its innovative cloud-based communications portfolio and position the Company for long-term success, it said in a statement. Completing the Financial Restructuring will reduce the Company’s total debt by more than 75%, from approximately $3.4 billion today to approximately $800 million. Additionally, it will substantially increase Avaya’s cash and strengthen its liquidity position, resulting in an expected emergence balance sheet with less than 1x net leverage. Due to the overwhelming support of its financial stakeholders, the Company expects to implement the Financial Restructuring on an expedited basis and complete this comprehensive balance sheet de-leveraging within 60 to 90 days. These actions will not impact the Company’s customers, channel and strategic partners, suppliers, vendors or employees. To efficiently implement the Financial Restructuring, Avaya and all of its U.S. subsidiaries today filed voluntary prepackaged Chapter 11 cases in the U.S. Bankruptcy Court for the Southern District of Texas. During this process, Avaya will continue serving its customers and partners without interruption and providing them with outstanding communications solutions, service and support as usual. The Company has received commitments for $628 million in debtor-in-possession financing, including a $500 million new-money term loan from the Investor Group led by Apollo Global Management (APO) and Brigade Capital Management, LP, among others, and a $128 million ABL facility from a bank syndicate led by Citi. Upon Avaya’s emergence from the court-supervised process, the $500 million new-money term loan and $128 million ABL facility will roll into exit facilities. Additionally, as part of the Financial Restructuring, certain members of the Investor Group have committed to provide $150 million of additional new-money financing through a fully backstopped debt rights offering at exit. This new committed financing of approximately $780 million, together with cash on hand and cash generated from ongoing operations, is expected to provide substantial liquidity to support Avaya during the restructuring process and beyond.