Telecommunications company Avaya Inc. is weighing a chapter 11 bankruptcy filing and nearing a deal to sell its call-center software unit in an effort to pare its heavy debt load after years of losses.
The company, which was taken private by buyout firms Silver Lake and TPG in 2007, could file for chapter 11 protection as soon as next month, according to people familiar with the matter. The filing would likely come after it reaches a deal to sellthe call-center software business, the people said.
Clayton Dubilier & Rice LLC is among the potential buyers that participated in the most-recent round of bidding for the unit, which could fetch around $4 billion, the people added.
Avaya could use the proceeds of the sale to repay some of its senior debt, while other creditors could swap debt for ownership in a reorganized company upon its emergence from bankruptcy, the people said. The company's long-term debt stood at around $6 billion as of June 30, according to a regulatory filing.
Much of the restructuring plan remains unclear and could take shape in negotiations with creditors including Blackstone Group LP's credit arm and Franklin Resources Inc. in the coming weeks, the people said. As always, there is no assurance the talks lead to a deal or that the company will file for chapter 11 protection.
Avaya, which began as part of AT&T Inc., sells phones and other telecommunications gear to corporations. It also sells hardware and software used in the call centers that companies use to communicate with retail clients. The Santa Clara, Calif., company's revenue has fallen since the financial crisis, which hit corporate spending, and the company hasn't posted an annual profit since its 2007 buyout.
Avaya has struggled to keep up with established competitors such as Cisco Systems Inc. and business-phone upstarts. The company would "need to constantly reinvest in new products and platforms to maintain its position," Moody's Investors Service said in an August note.
A bankruptcy filing would likely lead to losses for Silver Lake and TPG, which bought the company for around $8 billion during the buyout boom that preceded the financial crisis. Equity holders stand behind creditors in bankruptcy and rarely recover anything.
The buyout firms filed paperwork to take Avaya public in 2011 but didn't move forward with the offering.
In May, Avaya said it had hired Goldman Sachs Group Inc. and Centerview Partners to explore options including a sale or transaction to bolster its capital structure.
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(END) Dow Jones Newswires
November 23, 2016 20:05 ET (01:05 GMT)
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