Avaya’s reorganization plan has gotten the thumbs up from its key creditors, paving a way for the vendor to come out of Chapter 11 protection.
Its creditors include Ad Hoc Group of First Lien Creditors, the Ad Hoc Group of Crossover Creditors, the Official Committee of Unsecured Creditors, and Pension Benefit Guaranty Corporation (“PBGC”).
Citing court papers, Reuters reported that Avaya is on what it says is a “clear path” to emerging from bankruptcy. This development follows the company’s efforts to resolve disputes in mediation over its financial restructuring.
The company has also secured about $3 billion in financing, including a $2.43 billion term loan underwritten by a group of banks led by Goldman, Sachs & Co. and Citibank, N.A.
Avaya expects to have $2.93 billion of funded debt and a $300 million senior secured asset-based lending (ABL) facility available upon emerging from bankruptcy, down from the approximately $6 billion of debt on its balance sheet when Avaya began its financial restructuring process.
“The Global Resolution is one of the most significant milestones in our chapter 11 process, and we are pleased to have gained the Crossover Group’s support for the Second Amended Plan,” said Jim Chirico, president and CEO of Avaya, in a release. “It was our goal all along to reach a Plan of Reorganization that is fully supported by all of our major creditor groups.”
This revised capital structure is expected to save the company 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.
As the company looks to regain its financial footing, Avaya has also named Patrick O’Malley as SVP and CFO, taking over from David Vellequette, who has served as Avaya’s CFO for the past five years. Vellequette will serve as Senior Vice President of Finance until the end of 2017 to ensure a smooth transition and help complete Avaya’s debt restructuring and public listing efforts.
O’Malley comes to Avaya following a 30-year career with Seagate Technology, where he served in a variety of roles, including serving as CFO from 2008 to 2015. During his career at Seagate, he played an integral role in helping the company with its re-listing on the NASDAQ after two years of private ownership and with the restructuring of its debt following the 2008 financial crisis.