Item 1.01 Entry into a Material Definitive Agreement.
Notes Offering
On July 12, 2022, Avaya Inc. (the “Company”), a Delaware corporation and a wholly-owned subsidiary of Avaya Holdings Corp. (“Avaya”), closed its previously announced offering (the “Offering”) of $250,000,000 aggregate principal amount of its 8.00% Exchangeable Senior Secured Notes due 2027 (the “Notes”). The Notes were issued pursuant to an indenture, dated as of July 12, 2022 (the “Indenture”), by and among the Company, the guarantors party thereto (the “Guarantors”) and Wilmington Trust, National Association, as trustee, exchange agent and notes collateral agent. Interest is payable on the Notes on June 15 and December 15 of each year, commencing on December 15, 2022, until their maturity date of December 15, 2027 (the “Maturity Date”), subject to earlier redemption or repurchase.
Holders of the Notes may exchange all or a portion of their Notes at their option (i) at any time prior to the close of business on the business day immediately preceding September 15, 2027, subject to the satisfaction of certain conditions, and (ii) on or after September 15, 2027, at any time prior to the close of business on the second scheduled trading day immediately preceding the Maturity Date. Upon exchange of the Notes, the Company will pay and/or deliver, as the case may be, cash, shares of Avaya’s common stock, $0.01 par value per share (the “Common Stock”) or a combination of cash and Common Stock, at the Company’s election. The exchange rate will initially be 232.5581 shares of Common Stock per $1,000 principal amount of Notes (equivalent to an initial exchange price of approximately $4.30 per share), subject to adjustment in certain events, including following certain corporate events that occur prior to the Maturity Date.
Upon any future occurrence of a Fundamental Change of Control (as defined in the Indenture), holders may require the Company to repurchase their Notes at a price equal to the principal amount plus accrued and unpaid interest. If a Make-Whole Fundamental Change of Control (as defined in the Indenture) occurs or becomes effective with respect to any Note and a holder elects to exchange its Notes in connection with such Make-Whole Fundamental Change of Control, then, subject to the provisions set forth in the Indenture, the exchange rate applicable to such exchange will be increased by a number of shares of Common Stock set forth in the table contained in the Indenture.
The Company may not redeem the Notes prior to June 20, 2024. The Company may redeem the Notes, at its option, in whole or in part (subject to the limitation that if fewer than all of the outstanding Notes are to be redeemed, at least $50,000,000 aggregate principal amount of Notes must be outstanding and not subject to redemption), on or after June 20, 2024, for a cash purchase price equal to a redemption price set forth in the Indenture, but only if the last reported sale price per share of Common Stock exceeds 150% of the then-applicable exchange price on each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately before the date on which the Company sends the redemption notice for such redemption.
The Indenture and the Notes provide, among other things, that the Notes are the Company’s senior secured obligations. The Notes are guaranteed on a senior secured basis by Avaya and each of the Company’s wholly-owned domestic subsidiaries that guarantee the Company’s term loan credit facility (the “Term Loan Facility”) under the Company’s Term Loan Credit Agreement (as defined below) and asset-based revolving credit facility (“ABL Facility”) under the Company’s ABL Credit Agreement, dated as of December 15, 2017 (the “ABL Credit Agreement”). The Notes and related guarantees will be secured on a first lien basis by substantially all assets of the Company and the Guarantors (other than any Excluded Collateral (as defined in the Indenture) or ABL Priority Collateral (as defined below)) which assets also secure the Company’s and each Guarantor’s obligations under the Term Loan Facility ratably on a pari passu basis, subject to permitted liens. The Notes and related guarantees will also be secured on a second-lien basis ratably on a pari passu basis with the Term Loan Facility, subject to permitted liens, by certain of the assets of the Company and the Guarantors that secure obligations under the ABL Facility on a first-lien basis (the “ABL Priority Collateral”).
The Indenture contains covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries to: incur or guarantee additional indebtedness or issue disqualified stock or certain preferred stock; pay dividends and make other distributions or repurchase stock; make certain investments; create or incur liens; sell assets; voluntarily prepay, repurchase or redeem or otherwise defease certain indebtedness; enter into restrictions affecting the ability of restricted subsidiaries to make distributions, loans or advances or transfer assets to the Company or the Guarantors; enter into certain transactions with the Company’s affiliates; designate restricted subsidiaries as unrestricted subsidiaries; and merge, consolidate or transfer or sell all or substantially all of the Company’s or the Guarantors’ assets. These covenants are subject to a number of important exceptions and qualifications.
The Indenture includes customary “events of default.”
The foregoing description of the Indenture does not purport to be complete and is qualified in its entirety by the full text of the Indenture, a copy of which will be filed with Avaya’s Annual Report on Form 10-K for the year ending September 30, 2022.
Registration Rights Agreement
On July 12, 2022, the Company and Avaya entered into a registration rights agreement (“RRA”) with Brigade Capital Management, LP (“Brigade”) that provides for certain customary shelf registration rights with respect to the Common Stock that is delivered or is deliverable upon exchange of the Notes held by Brigade. The RRA also contains customary representations, undertakings, conditions, indemnification and contribution obligations that were made only for the purposes of the RRA, solely for the benefit of the parties thereto, and may be subject to limitations agreed upon by the parties thereto.
The foregoing description of the RRA does not purport to be complete and is qualified in its entirety by the full text of the RRA, a copy of which will be filed with Avaya’s Annual Report on Form 10-K for the year ending September 30, 2022.
Term Loan Amendment
On July 12, 2022, the Company also entered into that certain Amendment No. 4 (“Amendment No. 4”) to the Term Loan Credit Agreement, dated as of December 15, 2017 (as amended by Amendment No. 1, dated as of June 18, 2018, Amendment No. 2, dated as of September 25, 2020, and Amendment No. 3, dated as of February 24, 2021, the “Term Loan Credit Agreement”), by and among the Company, as borrower, Avaya, Goldman Sachs Bank USA, as administrative agent and collateral agent, the subsidiary guarantors party thereto and each lender from time to time party thereto, pursuant to which the Company incurred incremental term loans in an aggregate principal amount of $350,000,000 (the “Incremental Loans”). The Amendment No. 4 also made certain other changes to the Term Loan Credit Agreement solely for the benefit of the lenders providing the Incremental Loans, including reducing flexibility for the Company to incur additional debt and liens or make restricted payments or investments under certain of the negative covenants.
The foregoing description of Amendment No. 4 does not purport to be complete and is qualified in its entirety by reference to the full text of Amendment No. 4, a copy of which will be filed with Avaya’s Annual Report on Form 10-K for the year ending September 30, 2022.