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Avaya Bankruptcy Settlement Approved

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The U.S. Bankruptcy Court approved Avaya’s motion for an order (a) approving a settlement with Pension Benefit Guaranty Corporation (PBGC) and (b) making the determination required for distress termination of the Avaya Pension Plan for salaried employees.

As previously reported, “The treatment of the Avaya Pension Plan for Salaried Employees (the ‘Salaried Pension Plan’) and the Avaya Pension Plan (the ‘Hourly Pension Plan,’ and with the Salaried Pension Plan, the ‘U.S. Qualified Pension Plans’) has remained a critical item for the Debtors’ creditor groups. In particular, each of the Ad Hoc First Lien Group and the Ad Hoc Crossover Group (together, the ‘Ad Hoc Creditor Groups’) have made clear that their support for any restructuring plan would be conditioned on the Debtors also obtaining material concessions with respect to their legacy liabilities – and the Salaried Pension Plan, in particular.”

In addition, “The Stipulation of Settlement also settles the $1.2 billion of asserted claims resulting from the termination of the Salaried Plan on terms that significantly aid the Debtors’ reorganization efforts without prolonged litigation….The Stipulation of Settlement resolves the resulting liabilities against the controlled group by providing for a cash distribution of $300 million and the issuance to PBGC of 7.5% of the equity of the Reorganized Debtors upon the Effective Date of the Debtors’ Amended Plan….The Stipulation of Settlement also provides that the Reorganized Debtors will continue to sponsor the Hourly Pension Plan with certain additional post-emergence protections. Those protections may require the Reorganized Debtors to contribute up to $150 million to the Hourly Pension Plan on a post-Effective Date basis in connection with the occurrence of certain ‘Material Transactions.'”

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