According to The Wall Street Journal on Wednesday, Clayton, Dubilier & Rice LLC (CD&R) was among the potential buyers in the bidding for Avaya’s call center business. Up to now, the buyout firm leads the bidding buying shares worth $4 billion.
Since August of 2016, Avaya has been looking to lessen its $6 billion debt load. Although deliberations are confidential, insider reports confirmed that CD&R has so far prevailed in the auction.
The Wall Street Journal also reported on Wednesday that Avaya could file for Chapter 11 bankruptcy protection as soon as next month. While a bankruptcy filing is a real possibility for Avaya, the company is trying to use the sale of the call center business to tackle its debt outside bankruptcy court, one of the Reuters sources said.
However, both companies declined to comment.
Restructuring plans remains unclear and could take shape with creditors in the coming weeks. These creditors include Blackstone Group LP’s credit arm and Franklin Resources Inc.
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 been generating strong cash flow accumulating to $900 million last year. But its interest expense reached $400 million every year resulting into a loss. This is in result of the debt the company took on in its $8.2 billion leveraged buyout in 2007 by private equity firms Silver Lake Partners LP and TPG Capital LP.
The company’s long-term debt stood at around $6 billion as of June 30, according to a regulatory filing. Maturity due of said debt is in October 2017.
Avaya has already announced it is being advised by Goldman Sachs Group Inc on evaluating expressions of interest in its assets, and by Centerview Partners Holdings LLC on “potential transactional alternatives” to shore up its capital structure. (Reporting by Jessica DiNapoli in New York; Editing by Peter Cooney)