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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.
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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.
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