Avaya has filed its chapter 11 reorganization plan and related disclosure statement with the goal of cutting its debt by more than $4 billion.
The plan outlines a path to “significantly reduce" Avaya’s pre-filing debt of about $6.3 billion, which would “strengthen the company’s balance sheet, improve financial flexibility and position it for long-term success," the company said. Avaya filed for chapter 11 in January.
“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, Avaya’s CEO. “We look forward to working closely with all stakeholders over the coming weeks and months to refine the plan and build consensus."
Under the proposed plan, which will continue to evolve as Avaya works toward creditor consensus and confirmation by the court, the following items are contemplated:
- 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 most of its pension obligations, following its emergence from bankruptcy
- Avaya will continue to honor and assume its two collective bargaining agreements and all related agreements.
Avaya has asked the court to schedule a hearing on May 25 to consider approval of the disclosure statement related to the plan. Following approval, Avaya will distribute the plan and statement to voting creditors for their consideration.
“Our normal business operations are running well, and we continue to sign significant customer renewals and new customer contracts," Kennedy said. “In addition, the company's consolidated balance sheet now has more than $750 million in cash. 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."