Avaya says it will exit chapter 11 bankruptcy protection by the end of the year following the US bankruptcy court approving the unified communications vendor's reorganisation and exit plan overnight.
At a hearing on 28 November, Judge Stuart Bernstein of the US bankruptcy court in New York said he was satisfied with Avaya's chapter 11 exit plan, which offers stock to debt holders and cash to unsecured creditors.
Avaya chief executive Jim Chirico said the approval of the plan was the result of months of work and extensive negotiations.
“In the coming weeks, Avaya will emerge from this process stronger than ever and positioned for long-term success, with the financial flexibility to create even greater value for our customers, partners and stockholders," he said.
Avaya said it has about US$2.92 billion of funded debt and a US$300 million senior secured asset-based lending facility available upon emergence from chapter 11 protection. The company said the figures represented a substantial decline from the US$6 billion debt Avaya had when it began its restructure.
The company, which competes with Microsoft and Cisco, expects to have an enterprise value of US$5.7 billion when it emerges from bankruptcy protection.
The restructure plan, which includes Avaya emerging from chapter 11 as a publicly listed company, provides holders of first-lien debt with 90.5 percent of stock in the company, and holders of second-lien notes with a pro rata share of 4 percent of stock, with warrants for an additional 5.1 percent of shares.
Unsecured creditors will receive US$57.5 million in cash and the government's pension insurer, the Pension Benefit Guaranty Corp, will receive $340 million in cash and 5.5 percent of shares
“I want to thank our customers and partners for their continued support,” Chirico said. “The trust and loyalty of our global customer base and partner network have played a vital role in Avaya’s success throughout this process.”
Additional reporting by Jim Christie