Moody's assigns Avaya Caa1, loan B3

Moody's Investors Service said it assigned a Caa1 corporate family rating and Caa1-PD probability of default rating to Avaya LLC following its emergence from bankruptcy. Moody's also assigned a B3 rating to the company's senior secured first-lien exit term loan. The outlook assigned is stable.

“Avaya's Caa1 CFR reflects the company's significantly improved debt load, representing an approximately 75% reduction post-emergence, and good liquidity position supported by $570 million of unrestricted cash and an undrawn $128M ABL at June 30, 2023. At the same time, Avaya will incur a sizable cash use approaching $300 million over the next three years by Moody's estimate, in conjunction with an uncertain operating profile.

“Avaya faces meaningful execution risk related to its organizational realignment and associated $523 million cost action, of which approximately 90% is complete and will run into FY24. Additionally, the company will likely need to nearly double its cloud business over five years to compensate for the anticipated decline in its traditional hardware and maintenance revenue (while assuming professional services and managed support services are relatively stable),” the agency said in a press release.

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