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Black Box CEO: There Are 'Multiple Bidders' For Federal Services Business

CEO Joel Trammell tells CRN that a deal for the solution provider's federal services business is expected to close by August and that growth is on the horizon.

Black Box CEO Joel Trammell told CRN that the company's 8-K filing last week with the U.S. Securities and Exchange Commission overemphasized the risks it faces if it doesn't find a buyer for its federal services business.

’Lawyers like gloom and doom,’ he said. ’Short of the zombie apocalypse, I think we covered everything that was possible to happen. Obviously, you don’t have a buyer until the deal closes, but we do have multiple bidders, and I would be shocked, of course, if the deal did not close on schedule.’

Black Box also last week secured a $10 million deal with a ’social media giant’ to build out a sprawling data center in Ohio – a deal with the potential to generate $300 million

In the 8-K filing, Black Box said it must sell off the unit to pay down $155 million in debt, an amount that has remained steady and not increased, Trammell said. With more than one buyer lined up, he said he expects to have a deal soon.

’We are well down the path of that process,’ Trammell said. ’We anticipate closing on that transaction by the end of August. We’ve got multiple parties who are in the process, and so we do not yet have a signed deal. We should have a signed deal by the end of the month.’

When Black Box released the 8-K last Monday, which predicted the company would run out of money by the end of the year and that if a sale were to fall through it may need to consider bankruptcy, stock prices fell below $1, its lowest level in at least a year. On July 17, 2017, Black Box shares closed at $8.20 and on Friday closed at $2.03.

Trammell said the SEC filing failed to account for the actions the Lawrence, Pa.-based solution provider taking to confront the obstacles it is facing.

’What that was saying is if we did nothing [there was that potential action],’ he said. ’If we don’t sell the federal business. If we’re not able to restructure the debt then, obviously, if the banks want their money back they can put us in default at that point, and could effectively lead to some sort of bankruptcy. Obviously, we’re going to take actions. We’re going to sell the federal business, were going to restructure the debt. If the banks want to drive us into bankruptcy, if they thought that was the appropriate thing, they could have done that previously. That’s clearly in no one's interest.’

He said the company has made no steps in that direction and remains committed to a profitable future.

’Bankruptcy probably takes four to six weeks to prepare,’ he said. ’We’ve spent no effort. We’ve spent zero dollars. We’re not thinking about bankruptcy. So, yes, that is the worst case. We can’t be absolutely certain we're going to close the federal deal. We can’t be absolutely certain we're going to restructure the debt. But those are highly likely events.’

Not only will Black Box remain in business, Trammell said, he expects it to grow over the next two years.

’I’m very confident when I tell you that each of our businesses -- the federal services, commercial services business and the products business -- will grow over the next two-year period,’ he said. ’They’ll be bigger two years from now than they are today. We did have a decrease in revenue in the commercial services business. We’ve stopped that fall. All the signs I see is that we’re going to continue to grow all three of our businesses over the next couple years.’

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