By Alexander Gladstone

Avaya Holdings Corp. on Tuesday filed for chapter 11 for the second time in six years as it struggles to transform itself from a traditional office telecommunications equipment business into a subscription-based software provider.

The company said it filed in the U.S. Bankruptcy Court in Houston with a plan supported by most senior lenders to cut its debt by more than 75%, to roughly $800 million from $3.4 billion, and turn the page on an earnings miss last year that depressed the prices of its debt and stock.

Avaya said it has received commitments for $628 million in debtor-in-possession financing, including a new $500 million loan from an investor group led by Apollo Global Management Inc. and Brigade Capital Management LP, as well as a $128 million credit facility from a bank syndicate led by Citigroup Inc. Certain members of the investor group have also agreed to provide an additional $150 million in new money through a rights offering.

The company said it expects to complete the prepackaged bankruptcy process in 60 to 90 days.

Eric Koza, Avaya's chief restructuring officer, said in court papers Tuesday the chapter 11 plan reflects a fully consensual deal with all of the company's creditor groups.

Avaya's revenue had declined because clients were signing up for cheaper and shorter software subscriptions than expected. The company said in August that it would miss its earnings forecast for the quarter ended June 30 by more than 60%, and that it had launched investigations into the quarterly results and potential weaknesses in its financial reporting controls.

That surprise disclosure dragged down prices of the company's shares and bonds, including a $600 million debt offering that Goldman Sachs Group Inc. and JPMorgan Chase & Co. had arranged weeks earlier.

Avaya has been unable to complete quarterly and annual earnings statements since May because of its internal investigations. The company said in November it had concluded that its disclosure controls and procedures weren't effective and that the investigations could find additional material weaknesses.

The Wall Street Journal reported in December that Avaya was veering toward a bankruptcy filing that would hand control to Apollo and other senior lenders.

"Strengthening Avaya's capital structure is a critical step to fully realize our transformation," Chief Executive Alan Masarek said.

The chapter 11 filing creates a forum to resolve legal claims against Avaya's directors and officers concerning its August earnings and potentially to provide them with a release from litigation pending the completion of the company's internal investigations.

Kirkland & Ellis LLP, Evercore Group LLC and AlixPartners LLP are serving as the company's advisers.

Write to Alexander Gladstone at alexander.gladstone@wsj.com

(END) Dow Jones Newswires

February 14, 2023 18:40 ET (23:40 GMT)

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