California-based telco Avaya is pondering a chapter 11 filing for bankruptcy as it gets close to a deal for selling its call-centre software unit, the Wall Street Journal has reported.
The company is apparently selling the unit to reduce the huge amount of debt it has after failing to make a profit for the last nine years. Its debt stood at about US$6 billion at the end of June, the newspaper said.
Avaya is owned by Silver Lake and TPG Capital which took it private after buying the firm in 2007 for about US$8 billion.
The company was originally part of AT&T and sells phones and other telecommunications equipment, plus hardware and software used in call centres.
{loadposition sam08}The newspaper's sources said that among the recent bidders for the call-centre software unit was Clayton Dubilier & Rice. It could bring about US$4 billion, the paper said.
Plans were not set in concrete yet, and depended on talks with creditors who include Blackstone Group’s credit arm and Franklin Resources.
There was no guarantee that these talks could lead to a deal or result in the company filing for chapter 11 protection.
Avaya provides services in 31 South American countries, according to the BNAmericas website.
Its debt has risen as it morphs from from a traditional hardware firm into a software and services group. By May, 80% of its Latin American and Canadian sales already came from software and services.
In fiscal Q3, Avaya reported US$882 million in global revenue, down 11% year-on-year. Of this, US$87 million came from Canada and Latin America.
While the company has been generating strong cash flow, with adjusted earnings before interest, taxes, depreciation and amortisation last year reaching US$900 million, it has a mountain of debt to pay off due to the leveraged buyout in 2007, according to Reuters.
Interest payments of about US$400 million a year have ensured consistent annual losses.