CD&R in the lead to acquire Avaya’s call center unit -sources

Industry: Other 2016-11-25

Buyout firm Clayton, Dubilier & Rice LLC (CD&R) is in the lead to acquire the call center business of debt-laden telecommunications equipment company Avaya Inc for around $4 billion, people familiar with the matter said on Wednesday.

Avaya has been looking for ways to lessen its $6 billion debt load, as it transitions from a legacy hardware business to a software and services company. The sale of that unit would significantly aid those efforts.

CD&R has so far prevailed in an auction for Avaya’s call center business, the people said, cautioning that no deal was certain and asking not to be identified because the deliberations are confidential.

The Wall Street Journal reported earlier on Wednesday, citing sources, that CD&R was among the potential buyers that participated in the most recent round of bidding for Avaya’s call center business. Reuters reported in August that Avaya was accepting bids for the unit, including from Genesys Telecommunications Laboratories Inc.

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.

Avaya and CD&R declined to comment.

Avaya faces a $600 million debt maturity due in October 2017. In its preliminary quarterly results released last month, the company’s revenue fell to between $945 million and $955 million from about $1 billion in the same time period last year.

Avaya has been generating strong cash flow, with adjusted earnings before interest, taxes, depreciation and amortization last year reaching $900 million.

But its interest expense of more than $400 million every year has been pushing it consistently into a loss. Much of that is the 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.

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)