Next Steps in Your Avaya Chapter 11 Journey

Continued from Page 1

Caution Required

Positive news aside, an enterprise customer still must be cautious about the state of a company in Chapter 11 for the following reasons:

Possible erosion of perceived value -- In order to transition out of Chapter 11, and to optimize the value of Avaya as a company and its shares, Avaya must keep the public informed of where it is in the Chapter 11 process and present as positive a view as possible. Avaya must minimize any erosion to its base (of more than 100 million endpoints) and continue to bring in new sales, difficult as that can be while it is in Chapter 11.
Avaya's debt is significant -- Avaya must overcome a mountainous level of debt in order to get whole again, and enterprise customers must take this into serious consideration since the company faces an uphill battle in getting out of debt. Based on the debt involved, I do not believe Avaya will be able to emerge from Chapter 11 quickly. The following chart shows the debt at $6 billion (not including $1.78 billion in unfunded pension liabilities), with net EBITA at $924,000 last fiscal year. Of its $3.7 billion in new business in the fiscal year, Avaya's new customer revenue was 13%, or $481 million (again, as noted above, new sales could erode during the Chapter 11 period). Avaya's networking business is estimated to sell at $100 million (or 1.7% of the $6 billion debt).

The final outcome for Avaya is still unknown -- It's too early in the timeline of Avaya's Chapter 11 journey to determine what the final outcome is going to look like, as much of this is up to the bondholders and whether they will agree with Avaya's restructuring plan going forward. Avaya has clearly stated that the plan for reorganization it filed last week will not be the final plan.
Avaya's stock is not a good investment -- Avaya's announcement from last week cautions any investment in Avaya stock. To quote the company:

"... security holders are cautioned that trading in securities of the Company during the pendency of these Chapter 11 cases will be highly speculative and will pose substantial risks. It is possible some or all of the Company's currently outstanding securities may be cancelled and extinguished upon confirmation of a restructuring plan by the Bankruptcy Court. In such an event, the Company's security holders would not be entitled to receive or retain any cash, securities or other property on account of their cancelled securities. Trading prices for the Company's securities may bear little or no relation to actual recovery, if any, by holders thereof in the Company's Chapter 11 cases. Accordingly, the Company urges extreme caution with respect to existing and future investments in its securities."

While Avaya must make such statements publicly, they are cautionary just the same.

Continue to Page 3 for your next steps