S&P Comments On Avaya Ratings

12 Feb 2004
Standard & Poor's Ratings Services said today that the announced raising of $251 million of proceeds from the sale of 14 newly issues common shares by Avaya Inc. would not have an impact on the rating or outlook. The proceeds of the sale are expected to be used to redeem 35% face value of its outstanding $640 million senior secured notes. The successful redemption of the senior secured notes would reduce total funded debt outstanding to a pro forma amount of approximately $730 million, from $954 million at Dec. 31, 2003. 
This transaction, in combination with other recent actions including equity issuance in September 2003 and the sale of the connectivity business, have helped to lower Avaya's leverage and add liquidity to the balance sheet. Despite these improvements, however, Avaya remains highly leveraged when capitalized operating leases and underfunded pension obligations are included in total liabilities. While operating performance appears to have stabilized and has shown initial signs of a modest recovery, additional improvements in profitability and/or debt reduction are necessary before the outlook will be reviewed for a revision to positive.