Item 1.01. Entry into a Material Definitive Agreement.
The Investment Agreement and the Notes
On June 24, 2022, Avaya Inc. (the “Company”), a wholly-owned subsidiary of Avaya Holdings Corp. (“Avaya”), upsized its previously announced offering of 8.00% Exchangeable Senior Secured Notes due 2027 (the “Notes”) to $250,000,000 in aggregate principal amount of Notes, and entered into investment agreements (the “Investment Agreements”) with certain qualified institutional investors (the “Investors”) and Avaya, relating to the issuance and sale by the Company to the Investors of $125,000,000 in aggregate principal amount of the Notes. $25,000,000 of the Company’s previously announced commitment to issue and sell $150,000,000 in aggregate principal amount of Notes to a qualified institutional investor will be reallocated across the Investors and in total $250,000,000 in aggregate principal amount of Notes will be allocated across all investors. The Company will use the proceeds from the Notes offering to prefund the repayment of, repurchase or otherwise make certain payments in respect of the Company’s existing $350.0 million of 2.25% Convertible Senior Notes due 2023 and for general corporate purposes. The Notes offering is subject to (i) market conditions and other factors and no assurance can be given as to if or when the Notes offering will be consummated, (ii) the substantially concurrent closing of a new term loan for aggregate gross proceeds that, together with the Notes, is no less than $500.0 million, and (iii) the negotiation of definitive documentation.
The Notes will be governed by an indenture (the “Indenture”) among the Company, certain guarantors (as described below), and Wilmington Trust, National Association, as trustee and notes collateral agent, or such other trustee and notes collateral agent as is appointed by the Company. The Notes will be the Company’s senior secured obligations and will be guaranteed on a senior secured basis by Avaya and each of the Company’s wholly-owned domestic subsidiaries that guarantees the Company’s term loan and asset-based revolving credit facilities. The Notes will bear interest at a rate of 8.00% per annum, payable in cash, semi-annually in arrears on June 15 and December 15 of each year, commencing on December 15, 2022. The Notes will mature on December 15, 2027 (the “Maturity Date”), subject to earlier redemption or repurchase, and upon maturity will be settled, at the Company’s election, in common stock, $0.01 par value per share (the “Common Stock”), of Avaya, or cash or a combination of Common Stock and cash. The Notes will have an initial exchange rate of 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.
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 certain limitations), on or after June 20, 2024, for a cash purchase price equal to a redemption price to be 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. Upon the occurrence of a fundamental change (as such term will be defined in the Indenture), the Investor will have the right to require the Company to repurchase all or some of the Notes for cash, subject to certain conditions.
The Indenture will include customary “events of default,” which may result in the acceleration of the maturity of the Notes under the Indenture. The Indenture will also include customary covenants for exchangeable notes as well as covenants that are expected to be substantially similar to the covenants applicable to the Company’s 6.125% Senior First Lien Notes due 2028.