Item 1.01. Entry into a Material Definitive Agreement.
Restructuring Support Agreement
On February 14, 2023, Avaya Holdings Corp. (the "Company") and certain of its
direct and indirect subsidiaries (together with the Company, the "Company
Parties") entered into a Restructuring Support Agreement (together with all
exhibits and schedules thereto, the "RSA") with (a) members of ad hoc groups of
lenders and noteholders (collectively, the "Consenting Stakeholders") under
(i) the Term Loan Credit Agreement, dated as of December 15, 2017 (as amended by
Amendment No. 1, dated as of June 18, 2018, Amendment No. 2, dated as of
September 25, 2020, Amendment No. 3, dated as of February 24, 2021, Amendment
No. 4 dated as of July 12, 2022, and as further amended from time to time,
the "Term Loan Credit Agreement"), by and among the Company, Avaya Inc.
("OpCo"), Goldman Sachs Bank USA, as administrative agent and collateral agent,
the subsidiary guarantors party thereto and each lender from time to time party
thereto, (ii) OpCo's 8.00% Exchangeable Senior Secured Notes due 2027 (the
"Exchangeable Notes"), and (iii) OpCo's 6.125% Senior First Lien Notes due 2028
(the "Secured Notes") and (b) RingCentral, Inc. ("RingCentral"). In the
aggregate, the Consenting Stakeholders hold over 90 percent of the Company
Parties' first lien debt. Capitalized terms used but not otherwise defined in
this "Restructuring Support Agreement" section of this Current Report on Form
8-K have the meanings given to them in the RSA attached as an exhibit to this
report.
The RSA contemplates a restructuring process pursuant to a prepackaged joint
plan of reorganization (the "Plan") that is intended to establish a financially
sustainable operating company with a more appropriate capital structure. The
contemplated restructuring process includes (i) the commencement by certain of
the Company Parties of voluntary cases (the "Chapter 11 Cases") under chapter 11
of title 11 of the United States Code (the "Bankruptcy Code"), (ii) certain of
the Consenting Stakeholders and/or their affiliates providing, on a committed
basis, the debtor-in-possession financing facilities (described below under
"Debtor-in-Possession Commitment Letters") that will convert into exit financing
facilities upon the Company Parties' emergence from the Chapter 11 Cases,
(iii) a fully backstopped $150.0 million debt rights offering (the "Rights
Offering") offered to holders of First Lien Claims (exclusive of B-3 Escrow
Claims) to fund Exit Term Loans and receive their pro rata share of common stock
of the reorganized Company in an amount equal what would have been issued if the
Rights Offering were an offering of such common stock, subject to a specified
discount and implied equity valuation, (iv) repayment of Escrow Cash to the B-3
Term Loan Lenders, and (v) entry into the Renegotiated RingCentral Contracts,
each on the terms set forth in the RSA. The Plan and the related disclosure
statement (the "Disclosure Statement") were each filed with the Bankruptcy Court
on February 14, 2023. As contemplated by the RSA, on such date, the Company also
commenced the Rights Offering and the solicitation of votes for the Plan by
causing the Plan, the Disclosure Statement and ballots to be distributed to
lenders under that Term Loan Credit Agreement and beneficial owners (or
nominees, investment managers, advisors or subadvisors for the beneficial
owners) of the Exchangeable Notes and the Secured Notes that are "accredited
investors" and/or non U.S. persons.
The RSA requires the achievement of the following milestones, among others,
certain of which may be extended under certain circumstances: (i) commencement
of the Chapter 11 Cases no later than February 14, 2023; (ii) entry of the
Interim DIP Order no later than three days after the Petition Date; (iii) the
Escrow Payment shall occur no later than the date when the Interim DIP Order is
entered by the Bankruptcy Court, which milestone can only be extended or waived
by the Required PW Ad Hoc Group Members; (iv) entry of the order provisionally
approving the adequacy of the Disclosure Statement, in form and substance
acceptable to the Company Parties and the Required Consenting Stakeholders, no
later than three days after the Petition Date; (v) entry of the Final DIP Order
no later than 45 days after the Petition Date; (vi) entry of the order approving
the adequacy of the Disclosure Statement, on a final basis, in form and
substance acceptable to the Company Parties and the Required Consenting
Stakeholders, no later than 60 days after the Petition Date; (vii) entry of the
Confirmation Order, in form and substance acceptable to the Company Parties and
the Required Consenting Stakeholders, no later than 60 days after the Petition
Date; (viii) substantial consummation of the Plan no later than 90 days after
the Petition Date; and (ix) occurrence of the Outside Date 180 days after the
Petition Date. The implementation of the Plan pursuant to the RSA does not
contemplate any recovery for holders of the Company's common stock, par value
$0.01 per share ("Common Stock").
The RSA also provides that the RSA may be terminated by the Required Consenting
Stakeholders (or by (a) the Required PW Ad Hoc Group Members as to the PW Ad Hoc
Group, (b) the Required Akin Ad Hoc Group Members as to the Akin Ad Hoc Group,
(c) an individual Consenting Stakeholder as to itself only), (d) RingCentral (as
to itself only), or (e) the Company Parties upon the occurrence of certain
specified events set forth therein. In particular, the Company Parties may
terminate the RSA in the event the board of directors, board of managers or such
similar governing body of any Company Party determines, after consulting with
outside counsel, (i) that proceeding with any of the transactions described
therein would be inconsistent with the exercise of its fiduciary duties or
. . .
Item 1.03. Bankruptcy or Receivership.
Voluntary Petition for Reorganization
On February 14, 2023 (the "Petition Date"), the Company Parties commenced the
Chapter 11 Cases in the United States Bankruptcy Court for the Southern District
of Texas (the "Bankruptcy Court"). The Company has filed a motion with the
Bankruptcy Court seeking joint administration of the Chapter 11 Cases under the
caption In re Avaya Inc., et al.
The Company Parties will continue to operate their businesses as
"debtors-in-possession" under the jurisdiction of the Bankruptcy Court and in
accordance with the applicable provisions of the Bankruptcy Code and the orders
of the Bankruptcy Court. To ensure their ability to continue operating in the
ordinary course of business, the Company Parties have filed with the Bankruptcy
Court motions seeking orders granting a variety of "first day" relief,
including, among other things, the authority to access cash collateral, pay
employee wages and benefits, assume all customer agreements and pay amounts due
under such agreements as they come due in the ordinary course, and pay vendors
and suppliers in the ordinary course for all goods and services provided after
the Petition Date.
The description of the RSA included in Item 1.01 is incorporated by reference
herein.
Item 2.04. Triggering Events that Accelerate or Increase a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement.
The filing of the Chapter 11 Cases constitutes an event of default that
accelerated and, as applicable, increased certain obligations under the
following debt instruments and agreements (the "Debt Instruments"):
• Approximately $220.6 million in outstanding aggregate principal amount
of the Company's 2.25% convertible senior notes due 2023 issued
pursuant to the Indenture, dated as of June 11, 2018, between the
Company and The Bank of New York Mellon Trust Company, N.A., as
trustee;
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• Approximately $1.0 billion in outstanding aggregate principal amount
of Secured Notes issued pursuant to the Indenture, dated as of
September 25, 2020, among OpCo, the guarantors party thereto and
Wilmington Trust, National Association, as trustee and notes
collateral agent;
• Approximately $250 million in outstanding aggregate principal amount
of Exchangeable Notes issued pursuant to the Indenture, dated as of
July 12, 2022, by and among OpCo, the guarantors party thereto and
Wilmington Trust, National Association, as trustee, exchange agent and
notes collateral agent;
• Approximately $95 million of outstanding borrowings, including letters
of credit, under the ABL Credit Agreement, dated as of December 15,
2017 (as amended by Amendment No. 1, dated as of September 25, 2020),
among the Company, OpCo, Avaya Canada Corp., Avaya UK, Avaya
International Sales Limited, Avaya Deutschland GmbH, Avaya GmbH & Co.
KG, Citibank, N.A. as collateral agent and administrative agent, the
lending institutions from time to time party thereto and the lending
institutions named therein as letters of credit issuers and swing line
lenders (the "Prepetition ABL Credit Agreement"); and
• Approximately $1.9 billion of outstanding borrowings under the Term
Loan Credit Agreement.
The Debt Instruments provide that, as a result of the Chapter 11 Cases, the
principal and interest and certain other amounts (to the extent applicable) due
thereunder shall be immediately due and payable. Any efforts to enforce such
payment obligations under the Debt Instruments against the Company Parties are
automatically stayed as a result of the Chapter 11 Cases, and the creditors'
rights of enforcement in respect of the Debt Instruments are subject to the
applicable provisions of the Bankruptcy Code.
Item 7.01. Regulation FD Disclosure.
Press Release
In connection with the filing of the Chapter 11 Cases, the Company issued a
press release on February 14, 2023, a copy of which is attached to this Current
Report on Form 8-K as Exhibit 99.1.
Cleansing Material
In December 2022, and January and February 2023, the Company Parties executed
confidentiality agreements with certain of the Consenting Stakeholders
(collectively, the "Confidentiality Agreements") to continue confidential
discussions and negotiations concerning a potential transaction. Pursuant to the
Confidentiality Agreements, the Company Parties provided such parties under the
Confidentiality Agreements with certain confidential information and agreed that
if certain conditions were met, the Company Parties would publicly disclose
certain confidential information (collectively, the "Cleansing Materials"). As
described above in Item 1.01, the Company Parties have entered into the
Restructuring Support Agreement with the Consenting Stakeholders and as a result
of the foregoing, the Cleansing Materials included as Exhibit 99.2 hereto are
being furnished in satisfaction of the Company Parties' public disclosure
obligations under the Confidentiality Agreements.
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Company Headquarters
On February 12, 2023, the Company determined that its corporate headquarters
would be relocated from Raleigh-Durham, North Carolina to Morristown, New
Jersey, effective as of February 10, 2023.
NYSE Delisting Notice
The Company expects to receive a notice from the NYSE that the Common Stock is
no longer suitable for listing pursuant to NYSE Listed Company Manual
Section 802.01D as a result of the Chapter 11 cases. If the Company receives
such notice, the Company does not intend to appeal the NYSE's determination and,
therefore, it is expected that its Common Stock will be delisted. The delisting
of the Common Stock would not affect the Company's operations or business and
does not presently change its reporting requirements under the rules of the SEC.
The information disclosed in this Item 7.01, including Exhibits 99.1 and 99.2,
is being furnished and shall not be deemed "filed" for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
otherwise subject to the liabilities of that Section, nor shall it be deemed
incorporated by reference in any filing under the Securities Act of 1933, as
amended, or the Exchange Act, except as explicitly set forth by specific
reference in such a filing.
Additional Information on the Chapter 11 Cases
Court filings and information about the Chapter 11 Cases can be found at a
website maintained by the Company Parties' proposed claims and noticing agent,
Kurtzman Carson Consultants LLC, at http://www.kccllc.net/avaya.
Cautionary Note Regarding the Company Parties' Securities
The Company Parties caution that trading in their securities, including the
Common Stock, during the pendency of the Chapter 11 Cases is highly speculative
and poses substantial risks. Trading prices for the Company Parties' securities
may bear little or no relationship to the actual recovery, if any, by holders of
the Company Parties' securities in the Chapter 11 Cases. In particular, the
Company expects that its equity holders could experience a significant or
complete loss on their investment, depending on the outcome of the Chapter 11
Cases.
Cautionary Note Information Regarding Projections
The financial projections, prospective financial information and forecasts
(collectively, the "Projections") included in the Cleansing Materials were not
prepared with a view towards public disclosure or compliance with the published
guidelines of the SEC or the guidelines established by the American Institute of
Certified Public Accountants for the presentation and preparation of
"prospective financial information." The Company generally does not publicly
disclose detailed prospective financial information. The Projections were
prepared for the internal use of the Company and were provided pursuant to the
Confidentiality Agreements for the limited purpose of providing information in
connection with the Company's discussions about one or more potential
financings, refinancings, recapitalizations, reorganizations, restructurings or
investment transactions involving the Company.
The Projections have been prepared by and are the responsibility of the
Company's management. The Projections do not purport to present the Company's
financial condition in accordance with accounting principles generally accepted
in the United States. Neither the independent registered public accounting firm
of the Company nor any other independent accountant has audited, reviewed,
examined, compiled, or performed any procedures with respect to the Projections
and, accordingly, none has expressed any opinion or any other form of assurance
on such information or its achievability and none assumes any responsibility for
the Projections.
The inclusion of the Projections should not be regarded as an indication that
the Company or any other person considered, or now consider, the Projections to
be a reliable prediction of future events, and does not constitute an admission
or representation by any person that the expectations, beliefs, opinions, and
assumptions that underlie such forecasts remain the same following the date of
this Current Report on Form 8-K, and readers are cautioned not to place undue
reliance on the prospective financial information.
The estimates and assumptions underlying the Projections are subject to
significant economic and competitive uncertainties and contingencies, which are
difficult or impossible to predict accurately and many of which are beyond the
control of the Company and may not prove to be accurate. The assumptions
underlying the Projections have not been realized as of the date hereof. The
Projections also do not reflect future changes in general business or economic
conditions, or any other transaction or event that may occur and that was not
anticipated at the time this information was prepared. The Projections
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are not, and should not be regarded as, a representation that any of the
expectations contained in, or forming a part of, the Projections will be
achieved. The Projections are forward-looking in nature. Further, the
Projections relate to multiple future years and such information by its nature
becomes less predictive with each succeeding day. Accordingly, the Company
cannot provide any assurance that the Projections will be realized; actual
future financial results will vary from such forward-looking information and may
vary materially.
The above considerations should be taken into account in reviewing the Cleansing
Materials, which were prepared as of an earlier date. See "Cautionary Note
Regarding Forward-Looking Statements."
Cautionary Statement Regarding Forward-Looking Information
This Current Report on Form 8-K and the exhibits hereto contain certain
"forward-looking statements." All statements other than statements of historical
fact are "forward-looking" statements for purposes of the U.S. federal and state
securities laws. These statements may be identified by the use of
forward-looking terminology such as "anticipate," "believe," "continue,"
"could," "estimate," "expect," "intend," "may," "might," "our vision," "plan,"
"potential," "preliminary," "predict," "should," "will," or "would" or the
negative thereof or other variations thereof or comparable terminology. These
forward-looking statements are subject to a number of factors and uncertainties
that could cause the Company's actual results to differ materially from those
expressed in or contemplated by the forward-looking statements. Such factors
include, but are not limited to: risks attendant to the bankruptcy process,
including the Company's ability to obtain court approval from the Bankruptcy
Court with respect to motions or other requests made to the Bankruptcy Court
throughout the course of the Chapter 11 Cases, including with respect to any
proposed debtor-in-possession financing; the ability of the Company to
negotiate, develop, confirm and successfully consummate a plan of
reorganization; the effects of the Chapter 11 Cases, including increased legal
and other professional costs necessary to execute the Company's reorganization,
on the Company's liquidity (including the availability of operating capital
during the pendency of the Chapter 11 Cases), results of operations or business
prospects; the effects of the Chapter 11 Cases on the interests of various
constituents and financial stakeholders; the length of time that the Company
will operate under Chapter 11 protection and the continued availability of
operating capital during the pendency of the Chapter 11 Cases; objections to the
Company's restructuring process, DIP Facilities, or other pleadings filed that
could protract the Chapter 11 Cases; risks associated with third-party motions
in the Chapter 11 Cases; Bankruptcy Court rulings in the Chapter 11 Cases and
the outcome of the Chapter 11 Cases in general; conditions to which any
debtor-in-possession financing is subject and the risk that these conditions may
not be satisfied for various reasons, including for reasons outside the
Company's control; employee attrition and the Company's ability to retain senior
management and other key personnel due to the distractions and
uncertainties; the Company's ability to maintain relationships with suppliers,
. . .
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
10.1* Restructuring Support Agreement
10.2* Backstop Commitment Agreement
99.1 Press Release, dated February 14, 2023, entitled "Avaya Takes Action to
Accelerate Transformation and Fortify Capital Structure"
99.2 Cleansing Material
104 Cover Page Interactive Data File (formatted as inline XBRL)
* Certain schedules and similar attachments have been omitted. The Company agrees
to furnish a supplemental copy of any omitted schedule or attachment to the SEC
upon request.
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