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Avaya's Creditors Seek Legal Recourse Following Crash In Loan Value: Report

  • Investors of Avaya Holdings Corp’s AVYA $350 million incremental first-lien leveraged loan hired a law firm after the loan plunged by $0.30 on the dollar over the last week, Bloomberg reports.
  • Avaya marketed the deal with help from Goldman Sachs Group Inc and JPMorgan Chase & Co.
  • Akin Gump Strauss Hauer & Feld examined legal options over inadequate disclosures during the debt’s marketing process. 
  • The loan collapsed after the company slashed quarterly revenue and earnings expectations and appointed a new CEO
  • Avaya needed to refinance convertible bonds due in 2023 that were deeply out-of-the-money. 
  • Avaya brought the deal to a market weakened by recession fears, inflation, and rising interest rates after trimming its full-year earnings forecast. 
  • Investors withdrew at a proposed $500 million leveraged loan, forcing the company to split the planned issuance into a smaller loan and $250 million of privately-placed exchangeable notes, both secured on a first-lien basis. 
  • Avaya also agreed to hike the interest rate on loan to 10% over the Secured Overnight Financing Rate and include an upfront fee.
  • Barely a month later, on July 28, Avaya slashed its forecasted adjusted earnings for the third quarter by more than 60% and cut its revenue expectations by over 16%. 
  • Avaya’s share price closed on August 1 at around $0.82, a potential threat to the company, which needs to maintain a $1 share price over a 30-day trading period to remain listed on the NYSE. 
  • The credit grader cut its rating on Avaya two steps to CCC, citing possible struggle to maintain the listing requirements or seek to restructure its debts. 
  • Price Action: AVYA shares closed higher by 0.6% at $0.82 on Tuesday.

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