**Editor’s Note: Click here to see which channel people were on the move in July.**
The company has entered into a plan support agreement (PSA) with holders of more than half of its $4.38 billion first-lien debt. It also announced a settlement with the Pension Benefit Guaranty Corp. to terminate its underfunded salaried employee pension plan.
Avaya appointed Jim Chirico, currently its chief operating officer and global sales leader, as upcoming CEO. Kevin Kennedy will retire as CEO and member of the board of directors, but has agreed to remain as an adviser to the company. Chirico will join the board of directors on Oct. 1.
The agreements could cut more than $3 billion from the $6.3 billion in debt Avaya had when it entered bankruptcy in January. The company will seek approval of its revised disclosure statement and the PSA at its scheduled court hearing on Aug. 23.
“Today’s filings pave the way for Avaya’s near term exit from chapter 11 and our return as a publicly traded technology company,” Kennedy said. “The company will exit this process with an industry leading financial model preserved throughout the restructuring process, reduced complexity following the divestiture of our networking business, strong innovation across our portfolio and commercial execution that exceeded the Avaya business plan.”
Last month, Avaya sought more time to file a reorganization plan, saying it would draft a plan that would gain stakeholders’ support.
Chirico joined Avaya in 2008, and has held a variety of positions at the company. As COO and global sales leader, he is responsible for operations, global sales, sales operations, human resources and quality. Prior to Avaya, Chirico was executive vice president of global operations, development and manufacturing at Seagate Technology.
“I will work closely with Kevin over the next two months to ensure a smooth transition as we also continue the process to emerge from chapter 11,” Chirico said. “We will enter this next chapter with unique strengths and a new capital structure, and I look forward to working with the talented Avaya team to accelerate our long-term success. Kevin has been my mentor and coach for the past nine years, and I am grateful to be his successor. We all thank him for his leadership and success in transforming Avaya and navigating the debt restructuring process.”
Jon Arnold, principal at J. Arnold & Associates, said for those who want to see Avaya survive, the updated plan is good news. The process wouldn’t be taking this long if the key stakeholders wanted the company to fail, and it looks like the price has now been set to “remain in the game,” he said.
“Essentially, this update outlines the new terms of control, where the first-lien debt holders will drive the restructuring, and pension obligations will be handled now by a federal agency,” he said. “With an overall plan to emerge as a public company, and $3 billion in debt relief, there are clear signs here to customers and channels that Avaya will continue. While Q3 sales are down 9 percent (year over year), operations are profitable, and Avaya has signed over 1,300 contracts since declaring chapter 11, and hopefully there are enough positives to keep confidence going – among investors, customers and employees – until the new entity emerges, possibly this fall.”