Avaya has moved a step closer to exiting Chapter 11 bankruptcy after signing a support agreement with a major creditor group.
Nearly seven months after filing for Chapter 11, Avaya says it is now aiming to exit bankruptcy in the Northern Autumn 2017 after entering into a Plan Support Agreement with holders of more than 50% of its first lien debt, and reaching agreement with the US Pension Benefit Guaranty Corporation to provide for the termination of its obligations under the Avaya Pension Plan for Salaried Employees.
Kevin Kennedy, who has headed up the company for nearly 10 years, will step aside as chief executive, with current chief operating officer Jim Chirico taking on the role.
Peter Chidiac, Avaya Australia and New Zealand managing director, says the Plan Support Agreement provides a clear and viable path to exit Chapter 11.
“This is an important milestone as we work to emerge as a strong and competitive company in the coming weeks,” Chidiac says.
Meanwhile, he says the A/NZ business has ‘progressed strongly’ this year.
“Over the last two years we have been vocal about the transformation of the Australian and New Zealand business; we recognised the need to restructure in order to align to the demands of the A/NZ and deliver software and services that local organisations need and ensure the success of our customers.”
Chidiac says the transformation has proved positive for the company locally.
“Last year we reported that Avaya A/NZ closed its fiscal 2016 with its strongest quarter in 12 quarters, and the business has continued to build from there.”
The Plan Support Agreement includes support for restructuring of the company’s debt, which will reduce ‘by more than $3 billion’ from the $6.3 billion it had in debt when it entered bankruptcy in January. No changes in the business structure or operations are proposed as part of the plan.
The company has issued its preliminary third quarter 2017 results, with revenue expected to be flat at between US$802 million and $804 million, with EBITDA of $202 million to $206 million.
On the leadership change front, Avaya says Kennedy will continue as an advisor to Avaya following his retirement from the chief executive position. Chirico takes over the CEO role on October 1.
The company will head back to court later this month to seek approval for the PSA, which also needs to be approved by Avaya creditors.