has filed for protection from creditors under chapter 11 of the U.S. bankruptcy code, but will restructure its balance sheet and continue operations.
Under terms of the prepackaged bankruptcy, current Avaya (ticker: AVYA) common shares will likely expire worthless once the restructuring is completed.
Avaya said it has arranged nearly $780 million in new financing as part of an agreement with creditors that will eliminate more than 75% of the company’s existing debt while providing the company a cash and liquidity boost. Avaya said it expects to complete the reorganization process in 60 to 90 days, and that employees, vendors, and suppliers will continue to be paid.
The company said the proposed restructuring was approved by more than 90% of its secured lenders. The deal will reduce Avaya’s debt position to about $800 million from $3.4 billion. Avaya said that with “substantially improved financial flexibility,” it will “accelerate its investment in innovative communications products, solutions, and services for customers.”
Avaya said it has commitment for $628 million of debtor-in-possession financing, including a new $500 million term loan from a group led by
Apollo Global Management
(APO) and Brigade Capital Management, and a $128 million asset-backed loan from a group of banks led by
(C). Avaya also said certain members of the investor group have committed another $150 million of financing.
Avaya has extended its strategic partnership with
(RNG), originally formed in 2019, to sell a version of RingCentral’s cloud-based communications tools called “Avaya Cloud Office by RingCentral.” As part of the restructuring, RingCentral’s current preferred stock holding in Avaya will be eliminated.
Asked to comment, a spokesperson for RingCentral said the company would address the topic when it reports December quarter results on Wednesday.
In 2000, Avaya was spun off from the telecommunications company Lucent, which itself had been spun out of
(T) in 1995. Avaya was acquired by private-equity firms
and Silver Lake for $8.2 billion in 2007; the company filed for bankruptcy (the first time) in 2017. By the end of that year, after reorganizing its operations, Avaya came public.
After completion of the new reorganization, Avaya will no longer be a publicly traded company.
Trading in Avaya stock has been halted. The stock closed Monday at 27.53 cents; the shares were actually up 40% for the year to date.
Write to Eric J. Savitz at [email protected]
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