Avaya Inc., Santa Clara, Calif., will give the Pension Benefit Guaranty Corp. $340 million and 5.5% of shares as part of a Chapter 11 reorganization plan approved Tuesday by U.S. Bankruptcy Court Judge Stuart Bernstein in New York.
Avaya filed for bankruptcy protection in January and initially proposed keeping both PBGC-insured plans, but the company and its secured creditors concluded that terminating the salaried employee plan was necessary for the company to emerge from bankruptcy, the PBGC said.
In August, the PBGC took over the company's pension plan for salaried employees, which was underfunded by $1.1 billion and has been frozen since 2003. Avaya will keep its pension plan for hourly workers, where benefit accruals continue.
The salaried employees plan was 58% funded, with assets of $1.5 billion and liabilities of $2.6 billion. The hourly employees plan is 57% funded, with assets of $800 million and liabilities of $1.4 billion. Avaya also sponsors a non-qualified, supplemental pension plan for certain salaried retirees that is not insured by the PBGC.