Avaya's Creditors Seek Legal Recourse Following Crash In Loan Value: Report
Investors of Avaya Holdings Corp's (NYSE: 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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