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Orckit Communications Ltd. (Nasdaq: ORCT; TASE: ORCT) today petitioned the Tel Aviv District Court for a stay of proceedings as it attempts to reach a debt settlement with its bondholders. The company develops packet transport network solutions for Ethernet and communications networks, under the Orckit-Corrigent label, for telecommunications providers.
Orckit is due to pay $25 million on the principal of its two bond series on March 29, 2012, and it has just $28 million in cash. The bondholders are demanding that part of the company's cash be deposited with a trustee to ensure that it will be available for the payment. The stay of proceedings is intended to block the bondholders.
In July 2011, Orckit fired 35 employees, 17% of its workforce. The company has posted heavy losses, despite growing revenue, including a net loss of $1.5 million on $3.6 million revenue for the third quarter of 2011.
In filing with the US Securities and Exchange Commission (SEC), Orckit said that its Series A bondholders have the right to request early redemption of the bonds on March 29, 2012. During negotiations with the bondholders on a settlement, which would include postponement of part of the early redemption of the bonds' principal, the bondholders threatened legal action if the company did not agree by January 1, 2012, to repay a significant proportion of the principal.
At the same time, the Series A bondholders refused to let the Series B bondholders participate in the negotiations with the company. The Series B bondholders object to the Series A bondholders receiving preferential treatment.
Orckit said that if the court grants the stay of proceedings, this would block any legal action by the bondholders or other creditors, allow the company to conduct its business while it negotiates with the representatives of the holders of both bond series, under court oversight, in order to reach an agreed-upon settlement.
Orckit said that, during the stay of proceedings, it's business would continue under a trustee appointed by the court, while Orckit CEO Eric Paneth and president Izhak Tamir would keep their posts.
Orckit concluded that its "objective is to continue to seek to meet its business goals, including to secure orders with respect to one or more of the projects to be conducted by Tier 1 telecommunication service providers… and to raise additional funds to finance its operations until it can achieve a positive cash flow. "
Orckit's share price fell 0.4% in morning trading on the TASE following the announcement to NIS 3.67, after rising 2.1% on Nasdaq on Friday to $1.01, giving a market cap of $23 million
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