In December 2012, we entered into an amendment to the loan agreement relating to a violation of financial covenants for the period ended September 30, 2012. Under the amendment, HSBC agreed to waive non-compliance by us with certain financial covenants under our original loan agreement for the period ended September 30, 2012.
Although we continue to be current with all principal and interest payments under the loan agreement, as of December 31, 2012 we were in violation of certain financial covenants contained in the amended loan agreement that require us to maintain certain ratios of actual earnings before interest, taxes, depreciation and amortization (EBITDA) to projected EBITDA. HSBC has agreed to waive non-compliance by us with this financial covenant. However, if we fail to comply with our financial covenants in future periods, there is no assurance that HSBC will give us a waiver or forbearance agreement in the future. Any future violations under this credit facility may result in an acceleration of our obligations under the amended loan agreement and HSBC may exercise other remedies for default.
The question still exists: Will they need to raise additional capital? From 20-F
We will likely need to raise additional capital to meet our ongoing capital commitments and to fund our operations, and we may not be able to raise capital on terms acceptable to us or at all.
As of December 31, 2012, we had cash and cash equivalents of $36.6 million and working capital of approximately $152.7 million. In connection with the acquisition of MIG in November 2011, we will be required to make cash payments of approximately $16.5 million to the former shareholders and key employees of MIG in April 2013. Although we obtained a $50.0 million credit facility with HSBC in August
2012, as of March 31, 2013, we have substantially utilized this revolving credit facility. Accordingly, we anticipate that we will need additional financing in the next three months to meet our ongoing capital commitments and to fund our operations. In order to meet our ongoing capital commitments, we will need to seek additional capital, potentially through debt, or other equity financings. There can be no assurance that our efforts to find such financings will be successful or on terms favorable to us. Financings, if available, may be on terms that are dilutive to our shareholders, and the prices at which new investors would be willing to purchase our securities may be lower than the current price of our ordinary shares. The holders of new securities may also receive rights, preferences or privileges that are senior to those of existing holders of
our ordinary shares.
My take is that Ross will persuade the stake holders of MIG to delay the payment for another Q or 2. Most of these are management level that are getting integrated into Velti and they would not want to hurt their new position. I don't think they will have a problem with getting this pushed out a bit or getting a bridge loan.
I maintain my position (and my holdings): If they succeed by raising capital without diluting (e.g. factoring/a new loan/...), they will be fine. If they dilute they might as well stay off the radar for a couple of years.
They need to meet crucial payments in April. Let's see how they manage!