Avaya announced that it has reached global consensus (the "Global Resolution") regarding the terms of a chapter 11 plan with its major creditors, including the Ad Hoc Group of First Lien Creditors (the "First Lien Group"), the Ad Hoc Group of Crossover Creditors (the "Crossover Group"), the Official Committee of Unsecured Creditors (the "Creditors' Committee"), and Pension Benefit Guaranty Corporation ("PBGC"). As a result of the Global Resolution, Avaya has filed a Second Amended Plan of Reorganization (the "Second Amended Plan") which, among other things: (a) increases recovery for holders of Second Lien Notes Claims to 4.0% of Reorganized HoldCo Common Stock, and distributes warrants for an additional 5.0% of Reorganized HoldCo Common Stock to holders of Second Lien Notes Claims; (b) reduces the distribution of Reorganized HoldCo Common Stock to holders of First Lien Debt from 91.5% to 90.5%; (c) increases PBGC's proposed cash recovery from $300 million to $340 million and reduces PBGC's recovery in the form of Reorganized HoldCo Common Stock from 7.5% to 5.5%; and (d) reduces recoveries available to holders of General Unsecured Claims to $57.5 million. Avaya has also entered into a plan support agreement with members of the Crossover Group. As a result, the Second Amended Plan is now supported by holders of more than two-thirds of Avaya's First Lien Debt and more than two-thirds of Avaya's Second Lien Notes.
Avaya has also filed a Disclosure Statement Supplement and, subject to customary approvals, will distribute that supplement to voting creditors. Additionally, Avaya has filed a request for an updated confirmation schedule to accommodate this resolution. Subject to those approvals, including confirmation of the Second Amended Plan, Avaya expects to complete its restructuring and emerge from chapter 11 protection in 2017.
Avaya also announced today that it is launching an exit financing process secured by fully underwritten commitments. Subject to Bankruptcy Court approval, these commitments include $2.925 billion of funded debt, including a $2.425 billion term loan underwritten by a group of banks led by Goldman, Sachs & Co. and Citibank, N.A.
Avaya projects to have $2.925 billion of funded debt and a $300 million senior secured asset-based lending (ABL) facility available upon emergence from bankruptcy, a substantial reduction from the approximately $6 billion of debt on its balance sheet when Avaya commenced its financial restructuring. This revised capital structure is expected to save Avaya 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.
"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, Avaya's President and Chief Executive Officer. "It was our goal all along to reach a Plan of Reorganization that is fully supported by all of our major creditor groups. With a consensus-backed Plan and exit financing commitments in hand, we are closer than ever to emerging as a stronger, more competitive company. These developments are good news not only for Avaya, but for our customers and partners as well."
This press release is not intended as solicitation for a vote on the Second Amended Plan, and nothing herein is or should be considered a solicitation of votes for the acceptance of the Second Amended Plan or any Plan of Reorganization for the purposes of Bankruptcy Code sections 1125 and 1126 or otherwise. The full terms of the Second Amended Plan and revised Disclosure Statement, as well as the related pleadings, are available online at: https://cases.primeclerk.com/avaya.
Centerview Partners LLC and Zolfo Cooper LLC are Avaya's financial and restructuring advisors and Kirkland & Ellis LLP is the company's restructuring counsel.
The First Lien Group is represented by Akin Gump Strauss Hauer & Feld LLP and PJT Partners LP, as legal and financial advisors, respectively.
The Crossover Group is represented by Stroock & Stroock & Lavan LLP and Rothschild Inc., as legal and financial advisors, respectively.
The Creditors' Committee is represented by Morrison & Foerster LLP, Jefferies LLC, and Alvarez & Marsal North America, LLC, as legal, financial, and restructuring advisors, respectively.
PBGC is represented by Dentons US LLP and FTI Consulting, as legal and financial advisors, respectively.