Avaya Enters Restructuring Agreement

Avaya Holdings Corp., a global leader in solutions to enhance and simplify communications and collaboration,  has entered into a Restructuring Support Agreement with the overwhelming support of more than 90 percent of the company’s secured lenders. Implementing the Financial Restructuring will accelerate Avaya’s ongoing business transformation, significantly enhance its ability to invest in its innovative cloud-based communications portfolio and position the company for long-term success.

Completing the Financial Restructuring will reduce the company’s total debt by more than 75 percent, from approximately $3.4 billion today to approximately $800 million. Additionally, it will increase Avaya’s cash and strengthen its liquidity position, resulting in an expected emergence balance sheet with less than 1-time net leverage. Due to the support of its financial stakeholders, the company expects to implement the Financial Restructuring on an expedited basis and complete this comprehensive balance sheet de-leveraging within 60 to 90 days. These actions will not impact the company’s customers, channel and strategic partners, suppliers, vendors or employees.

Alan Masarek, Avaya’s Chief Executive Officer, said, “I joined Avaya to help unlock the power of its iconic brand, global customer footprint, massive partner ecosystem, large-scale communications deployments and outstanding team. Building on this tremendous foundation, we have made significant progress pioneering an ambitious business model transformation, establishing a competitive product strategy for our subscription and cloud-delivered services and implementing operational efficiencies to better serve the Avaya ecosystem. Strengthening Avaya’s capital structure is a critical step to fully realize our transformation, and we are excited to move ahead as a well-capitalized company with one of the strongest balance sheets in our industry that includes substantial cash to invest in our own success.”

With improved financial flexibility, the company will accelerate its investment in innovative communications products, solutions and services for customers, including the Avaya Experience Platform, its cloud-based Contact Center offering.

“We appreciate the strong support from our investors, who recognize the incredible value in Avaya’s business, brand and opportunities ahead,” Masarek said. “I also thank our customers and partners for their continued trust, as well as Avaya’s team members for their unwavering focus on providing exceptional service and support to those we serve. With this additional financial strength, we will be ideally positioned to accelerate innovation and advance our cutting-edge, long-range product roadmaps for the benefit of our customers.”

To implement the Financial Restructuring, Avaya and all of its U.S. subsidiaries today filed voluntary prepackaged Chapter 11 cases in the U.S. Bankruptcy Court for the Southern District of Texas. During this process, Avaya will continue serving its customers and partners without interruption and providing them with outstanding communications solutions, service and support as usual.

The company has received commitments for $628 million in debtor-in-possession financing, including a $500 million new-money term loan from the Investor Group led by Apollo Global Management Inc. and Brigade Capital Management LP, among others, and a $128 million ABL facility from a bank syndicate led by Citi.

Upon Avaya’s emergence from the court-supervised process, the $500 million new-money term loan and $128 million ABL facility will roll into exit facilities. Additionally, as part of the Financial Restructuring, certain members of the Investor Group have committed to providing $150 million of additional new-money financing through a fully backstopped debt rights offering at the exit. This new committed financing of approximately $780 million, together with cash on hand and cash generated from ongoing operations, is expected to provide substantial liquidity to support Avaya during the restructuring process and beyond.

Avaya has filed several customary motions with the court to support its operations during the court-supervised process, including the continued payment of employee wages and benefits without interruption. Pursuant to the terms of the Financial Restructuring, all of the Company’s vendors and suppliers will be paid in full, regardless of when goods or services were delivered. Vendors and suppliers to Avaya’s non-U.S. subsidiaries will continue to be paid in the ordinary course.

Avaya also announced it has extended and expanded its global, strategic partnership with RingCentral Inc., which was formed in 2019 to introduce and launch Avaya Cloud Office by RingCentral.

Avaya will continue to act as the exclusive sales agent for direct and partner sales of Avaya Cloud Office, Avaya’s exclusive multi-tenanted cloud PBX solution, in the geographies where it is available. The partnership has also expanded to include additional go-to-market constructs that enable Avaya to sell Avaya Cloud Office to its installed base on a direct basis. In addition, Avaya will be compensated in cash as Avaya Cloud Office seats are sold and, in connection with the Financial Restructuring, RingCentral’s preferred stock in Avaya will be eliminated.

Additional information regarding the company’s court-supervised process is available at www.AvayaRestructuringInfo.com. Court filings and other information related to the proceedings are available on a separate website administrated by the company’s claims agent, Kurtzman Carson Consultants (KCC), at www.kccllc.net/avaya, or by calling KCC toll-free at 877-709-4751, or 424-236–7231 for calls originating outside of the United States or Canada.