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U.S. judge clears Avaya Inc to exit bankruptcy (MSFT, CSCO)
By Jim Christie
Nov 28 (Reuters) - The judge overseeing the bankruptcy of Avaya Inc said on Tuesday he would confirm the telecommunication company's Chapter 11 plan, bringing its nearly year-long effort to reorganize its finances effectively to a close.
Judge Stuart Bernstein of the U.S. Bankruptcy Court in New York said at a hearing he was satisfied with the plan, which marked a third try by the communications software and services provider for a blueprint for emerging from bankruptcy.
The plan provides holders of first-lien debt with 90.5 percent of stock in the reorganized company and holders of second-lien notes with a pro rata share of 4 percent of stock and warrants for an additional 5.1 percent of the shares.
General unsecured creditors such as vendors will receive $57.5 million in cash and the government's pension insurer, the Pension Benefit Guaranty Corp, will receive $340 million in cash and 5.5 percent of shares.
Avaya, which competes with Microsoft Corp and Cisco Systems Inc, expects to have an enterprise value of $5.7 billion and about $2.9 billion in debt when it emerges from Chapter 11, compared with more than $6 billion when it filed for bankruptcy.
"In the coming weeks, Avaya will emerge from this process stronger than ever and positioned for long-term success, with the financial flexibility to create even greater value for our customers, partners and stockholders," Jim Chirico, Avaya's president and chief executive officer, said in a statement.
The Silicon Valley-based company, which was spun off from Lucent Technologies Inc in 2000, filed for bankruptcy protection in January. The company was burdened by its debt, an underfunded pension plan and competition from larger rivals as the industry shifted toward software services from hardware.
During its bankruptcy, Avaya terminated its salaried pension plan, which includes about 1,000 active employees and 7,000 retirees. The PBGC took over the plan which the agency claimed was underfunded by $1.2 billion.
In May, Avaya won court approval to sell its networking business to Extreme Networks Inc in a deal worth up to $100 million. (Reporting by Jim Christie; Editing by David Gregorio)
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