Irving-based Exela Technologies says it has received an offer to buy one of its business units that brings in $200 million in annual revenue.
Exela’s announcement Wednesday didn’t identify either the potential buyer or the business unit and characterized the offer as “a preliminary, non-binding proposal.” Exela is in talks with other entities about “additional acquisition proposals” as part of its 10-month-long campaign to boost investor confidence.
Exela did not respond to questions from The Dallas Morning News about the proposal.
The business process automation company said in September 2021 that it was committing $400 million to reduce debt and increase shareholder value. Last month, Exela announced its intention to sell “several standalone assets” for over $200 million.
“Our plans now include sales of assets as an incremental source of capital, with the ultimate goal of initiating a stock buyback program in the future,” executive chairman Par Chadha said at the time.
Philip Brendel, a senior credit analyst at Bloomberg Intelligence, said the preliminary nature of the offer could be a reason why Exela isn’t disclosing the potential buyer.
Over the last year, the company’s shares sank from $4.34 to 10 cents. In the midst of the stock price drop, the company underwent a CEO change with Ronald Cogburn leaving in April and Chadha running the company. Earlier this week, it appointed Suresh Yannamani as chief executive of one of its subsidiaries. Exela also brought on Sriram Ramanathan as chief technology officer in May and Lakshmi Narayanan as president of bills and payments in June.
Exela has liquidity issues that it has struggled to resolve in 2021 and this year. Last year, Exela had success in selling equity to raise over $500 million, but that’s likely not an option again with the stock only being worth 10 cents a share now, Brendel said.
The company has posted 12 consecutive quarters of year-over-year revenue decreases, posting a 10% drop last year to $1.16 billion. Brendel estimated its debt to be $1.25 billion at the close of the first quarter.
“Their interest burden is really significantly high,” he said.
Friday will be a big day for Exela. The company pays interest every six months on its issued notes, and this is the first time in which it will have to pay interest on both its 2023 and 2026 notes. The bulk of Exela’s debt – $926 million – carries an 11.5% interest rate on the 2026 notes, according to Brendel’s report.
“That’s a big liquidity demand on the company,” Brendel said.
Exela Intermediate, a subsidiary of Exela Technologies, led all high-yield bonds in the technology industry with a 47% loss through the second quarter, according to Robert Schiffman, a senior credit analyst at Bloomberg. It’s one of 26 companies that lost more than 10%.
Exela went public exactly five years ago from Wednesday. About half of the company’s 17,000 employees in 23 countries work remotely.
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