Avaya Weighing Bankruptcy Filing, Sale of Call-Center Software Unit
November 23 2016 - 8:20PM
Dow Jones News
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 sell the
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.
Write to Matt Jarzemsky at matthew.jarzemsky@wsj.com
(END) Dow Jones Newswires
November 23, 2016 20:05 ET (01:05 GMT)
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