Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Avaya Inc. and the Pension Benefit Guaranty Corporation reached a $300 million settlement involving one of the communication company’s pension plans ( Avaya, Inc. , Bankr. S.D.N.Y., No. 1:17-bk-10089, first amended joint chapter 11 reorganization plan filed 8/7/17 ).
Avaya will pay $300 million in cash and issue 7.5 percent of its reorganized holding company common stock to the PBGC, Avaya announced Aug. 7 in a filing with the Securities and Exchange Commission. The settlement provides for the termination of Avaya’s Salaried Pension Plan. The company’s Hourly Pension Plan will continue.
California-based Avaya is a multinational technology company that provides unified communications products and services, including telephone, internet, wireless data, and real-time video collaboration.
The company filed for bankruptcy Jan. 19. At the time, the company listed $5.5 billion in assets and $6.4 billion in debts. Some of its largest creditors included Wistron Technology America, Avnet Inc., Hewlett Packard, Verint Americas Inc., and Sales-Force.com Inc.
The PBGC has a claim in unfunded liabilities of up to $1.24 billion with respect to Avaya’s Salaried Pension Plan, according to the filings. The settlement is part of Avaya’s reorganization plan with its debtors and needs to be confirmed by the U.S. Bankruptcy Court for the Southern District of New York.
Avaya’s Salaried Pension Plan had 7,978 participants, $1.5 billion in assets, and was 88.64 percent funded as of December 2015, according to company filings. The plan was frozen in 2003.
The company’s other qualified defined benefit pension plan had 6,912 participants, $777 million in assets, and was 88.73 percent funded as of December 2015, according to company filings.
The plans’ funding shortfalls are greater, according to the PBGC. The pension plan for salaried employees is 58 percent funded and has $1.1 billion in unfunded obligations, according to a PBGC statement. The pension plan for hourly employees is underfunded by $600 million, the agency said.
A number of participants in Avaya’s non-qualified pension plan, which is not insured by the PBGC, filed letters asking the court to protect their pension benefits. Some of the participants who filed the letters took issue with Avaya’s request seeking authorization to pay up to $3.7 million in executive bonuses while, they said, the company suspended their non-qualified pension payments.
Kirkland & Ellis LLP represents Avaya.
To contact the reporter on this story: Carmen Castro-Pagan in Washington at email@example.com
To contact the editor responsible for this story: Jo-el J. Meyer at firstname.lastname@example.org
Text of the Reorganization Plan is at http://www.bloomberglaw.com/public/document/Avaya_Inc_Docket_No_117bk10089_Bankr_SDNY_Jan_19_2017_Court_Docke/4?doc_id=X1Q6NSV0D2O2&fmt=pdf.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)