Avaya looks to exit Chapter 11 bankruptcy protection

Avaya’s long seven-month Chapter 11 ordeal seems to be coming to a successful conclusion for the networking and collaborations vendor.

The New Jersey-based vendor entered a Plan Support Agreement with debt holders. Avaya also agreed to a plan where the U.S. Pension Benefit Guaranty Corp. carry its pension plan obligations for salaried employees.

One of the fall-outs of this deal is that CEO Kevin Kennedy is being replaced by current COO Jim Chirico starting this Oct.

The newly restructured Avaya will look like this:

  • Debt will be cut down by $3 billion;
  • The Avaya pension settlement and transfer to U.S. Pension Benefit Guaranty Corp.;
  • Avaya will continue to support its obligations under the Avaya Pension Plan; and
  • Initiation of steps to enable Avaya to emerge from chapter 11 as a public company.

Avaya is seeking court approval of this plan on August 23.

Jeff Wiener, the CEO of CDN Top 100 Solution Provider Digitcom, said its important to note that Avaya hasn’t yet emerged from Chapter 11. Although they have a creditor supported plan in place.

“Although I was confident that Avaya would emerge from Chapter 11 proceedings, the announcement today that they have a creditor supported plan of reorganization in place is definitely a sigh of relief and a step in the right direction. We have had many conversations with customers over the last few months, and we’ll now be able to present our customers with some positive news and provide some better assurances of Avaya’s go-forward plans. The cloud of uncertainty has been more or less lifted,” Wiener said.

It is important to note that the Canadian subsidiary of Avaya was not part of the Chapter 11 protection filing. Avaya’s Chapter 11 bankruptcy strategy was to formally restructure its balance sheet so that it can better position itself in the long term. The company got to this point by taking on debt after major acquisitions in the last decade highlighted by the big Nortel deal.

Kevin Kennedy, Avaya CEO
Kevin Kennedy, president and CEO of Avaya, speaking at Avaya Engage in Las Vegas, Feb. 13-15.

Outgoing CEO Kennedy did make a formal statement on the matter saying “it’s 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.”

Chirico, who takes over in Oct., was also Avaya’s Global Sales Leader. Chirico joined Avaya in 2008 and has held several positions in the last nine years. Prior to Avaya, Chirico was Executive Vice President, Global Operations, Development and Manufacturing at Seagate Technology.

Chirico, a long-time IBMer, also issued a statement, saying he is excited to have the opportunity to lead Avaya at a critical point in its history.

“I will work closely with Kevin over the next two months to ensure a smooth transition as we also continue the process to emerge from Chapter 11. We will enter this next chapter with unique strengths and a new capital structure, and I look forward to working with the talented Avaya team to accelerate our long-term success. Kevin has been my mentor and coach for the past nine years, and I am grateful to be his successor. We all thank him for his leadership and success in transforming Avaya and navigating the debt restructuring process.”

Kennedy also stated that he is retiring from the position and from the Avaya board of directors as well. Kennedy will be part of Avaya, but in an advisory role.


Would you recommend this article?


Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.

Jim Love, Chief Content Officer, IT World Canada

Featured Download

Paolo Del Nibletto
Paolo Del Nibletto
Former editor of Computer Dealer News, covering Canada's IT channel community.

Related Tech News

Featured Tech Jobs


CDN in your inbox

CDN delivers a critical analysis of the competitive landscape detailing both the challenges and opportunities facing solution providers. CDN's email newsletter details the most important news and commentary from the channel.