Avaya discusses Bankruptcy that Would Give Lenders Control

(Bloomberg). Avaya Holdings Corp. met with lenders to discuss a plan that could give them control of Avaya Holdings Corp. as part of a bankruptcy filing. According to people familiar with the situation,

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According to people familiar with the matter, the Chapter 11 filing allows companies to continue operating while negotiating a plan to repay creditors. It could be filed as soon as the month ends. According to the people, the company had been in discussions with first-lien lenders such as Ares Management, Apollo Global Management, and Invesco.

According to the sources, the telecom company has been in discussions with lenders regarding possible debtor-in–possession financing that could be used to fund the company during bankruptcy. The people said that discussions are ongoing and plans could be changed.

Representatives from Avaya Apollo and Ares did not respond to requests for comment. Invesco did not return messages.

Last month, Avaya revealed that it had received multiple restructuring proposals by creditor groups. Some were pushing for Avaya to restructure via bankruptcy while others wanted Avaya out of court.

The potential Chapter 11 filing could allow investors to sue the company for their losses, according to the people. Many holders of the company’s convertible notes have elected not to enter into confidential talks with the company in order to preserve their rights to pursue litigation against management and directors if the company lands in bankruptcy court, the people said.

Avaya was criticized by creditors last year when it published preliminary results that showed a sharp decline in earnings compared with earlier guidance. This just weeks after it sold investors a leveraged loan. The move raised questions about how the company’s results fell so short of projections shared with lenders during the loan syndication process.

Investors became concerned about the company’s financial health, breached fiduciary duties, and entered into bad-faith negotiations. These allegations served as the foundation for possible lawsuits.

Avaya had filed for bankruptcy in 2017

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