Avaya will be able to exit bankruptcy ‘in the near-term' according to now former CEO Kevin Kennedy, thanks to a new agreement signed with some of the comms vendor's priority debt holders.
The firm today announced that it has signed a Plan Support Agreement (PSA) with holders of more than 50 per cent of its first lien - or highest priority - debt.
The new plan is the result of "extensive negotiations" among Avaya and members of its "Ad Hoc First Lien Group". The creditors have agreed to support Avaya's amended plan - which includes wiping more than $3bn from Avaya's debts, and transferring pension plan obligations under the Avaya Pension Plan for Salaried Employees (APPSE) to the US Pension Benefit Guaranty Corporation (PBGC).
The amended plan also pledges to take steps to enable Avaya to emerge from the Chapter 11 process as a public company. The plan still needs permission from the Court - which it will hope to secure at its next hearing on 23 August - to solicit creditor votes and receive requisite votes before it can be confirmed.
In a statement, Kennedy claims that the latest agreement gives Avaya a "clear and viable path" to emerge from the Chapter 11 process "in the near-term".
"This is an important milestone in the chapter 11 process and marks Avaya's progress toward our goal of emerging a stronger, more competitive company. Further, we believe this is a positive and beneficial outcome for our stakeholders. With a creditor-supported and confirmable plan of reorganization in place, we now have a clear and viable path to emerge from chapter 11 in the near term."
Along with the debt holder agreement, Avaya announced that Kennedy is stepping down from the CEO post to be replaced by chief operating officer Jim Chirico as of 1 October. Kennedy will also retire from the board of directors, but will remain an advisor to the firm.
Avaya's bankruptcy left it indebted to scores of channel partners - both resellers and distributors. At the time, Avnet was named the firm's second biggest unsecured creditor, with Avaya owing the distribution giant $8.8m in unsecured debt. Other large creditors include big reseller partners such as World Wide Technology and SHI, which at the time were owed $1.6m and $1.25m respectively.
According to Ronald Rubens, vice president of northern Europe at Avaya, the comms vendor has continued to win business across the region despite the chapter 11 process.
"Business in [the] region is proving positive - we have seen successive growth in the last three quarters and signed large projects with government, financial services institutions, emergency services and service providers across northern Europe. Specific to the UK, we have added over 10,000 seats on our cloud ‘Powered By' platforms in the last few months, and June saw our fastest growth to date."
"We take great pride with the level of confidence and support that we continue seeing from our customers and partners in Northern Europe."
Yet reports recently emerged of Avaya losing out on business elsewhere in Europe. Only last week Reuters reported that T-Systems - the IT services arm of Deutsche Telekom - won a five-year services contract covering 23,500 healthcare employees, replacing incumbent provider Avaya.
Avaya has also today filed its preliminary third quarter 2017 financial results, which expects revenues to fall nine per cent year over year year to around $802m to $804m, while EBITDA is forecast to come in at $202m to $206m, down from $223m reported in Q3 of 2016.
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