Bain Close to Ceding Control of Latin America Call Center Giant

(Bloomberg) -- Bain Capital LP is preparing to hand its controlling stake in call center firm Atento SA to creditors after a share-price collapse shrunk the company's value to less than a fifth the size of a loan secured against the private equity investor's stake.

The U.S. private equity firm is in talks with investors led by HPS Investment Partners and GIC Pte., which hold most of the loan worth about $400 million, according to people familiar with the matter. The discussions involve a plan to replace board directors that Bain appointed, the people said, asking not to be named discussing private information.

Bain Capital declined to comment. Representatives for HPS, GIC and Atento didn't reply to requests for comment.

Bain took over the call-center arm of telecom giant Telefonica SA in 2012 for more than 1 billion euros ($1.1 billion). In 2014, it listed the business in the U.S. and raised a margin loan which pays interest with more debt, a so-called payment-in-kind loan, or PIK, on its remaining stake.

Bain's Atento Seeks Way Out of $404 Million Parent Unit Debt

But falling margins at the firm's core Brazilian business and other challenges caused the stock to fall more than 90% in five years, reducing the value of Bain's almost two-thirds stake in the business to about $50 million and effectively the amount of money lenders could recover. Atento's market capitalization currently stands at around $72.3 million, according to data compiled by Bloomberg.

The share drop at Atento, which employs more than 150,000 mainly Latin America-based staff, highlights the risks of PIK debt. The structure is typically used to finance transactions where the borrower is betting on rapid growth that generates cash fast enough to outpace a steady rise in the amount owed.