Dive Brief:

• Avaya could soon emerge from Chapter 11 bankruptcy if an agreement reached with its senior creditors and the government's pension insurer is approved, the company said in a statement on Monday, according to Reuters.
• Under the proposal, first-lien debt holders would get about 95% of what they are owed, holders of second-lien notes would receive about 1.6%, according to court papers, and unsecured creditors would get about 8.2 % of what they are owed. In total, the agreements could reduce Avaya's debt by about $3 billion. The company owed about $6.3 billion when it entered bankruptcy at the beginning of this year. The plan also includes a settlement with the Pension Benefit Guaranty Corp to end Avaya's underfunded employee pension plan.
• The plan must still be approved by Avaya's creditors and a U.S. Bankruptcy Judge.

Dive Insight:

Avaya filed for Chapter 11 restructuring in January. The company has been working to transform itself from a hardware company to a software and services company. Post-reorg, the company will need to continue that transition to survive in the evolving technology landscape and to get to a place where it can compete against startups and others that adapted to change faster. 

If Avaya's proposal is accepted, the company will get a new board that will be named by holders of the company's first-lien debt, which includes dozens of firms. While emerging from bankruptcy is a good sign, a coordinated, strategic new direction for the company given all the parties involved could be challenging.

Avaya has made a few strategic moves during its bankruptcy. Extreme Networks Inc. acquired Avaya, Inc.'s networking business in July. At the time, experts said offloading its wired, WLAN and Fabric technology would allow Avaya to focus on its core Unified Communications and Contact Center solutions business. Later, Avaya tried to sell its call center business, but that deal fell through.