Wow, Buscher and Michaels are even bigger #$%$ than I gave them credit for. They had to have known they would not come anywhere close to the $51 million in revenue in Q4 required by the Gores deal. I would have loved to have seen the looks on their faces when they learned Gores had pulled the $8.3 million out of their account. I have to think the genius at Gores who did this deal has been made available to the industry.
Powerwave and Gores Group Reach Deal on Cash
Published January 31, 2013 Dow Jones Newswires
Wireless-equipment maker Powerwave Technologies Inc. (PWAVQ) reached an agreement with its private-equity investor, the Gores Group, Thursday that will allow it access to the cash it needs to continue operations.
Judge Mary Walrath of the U.S. Bankruptcy Court in Wilmington, Del., said she would confirm the agreement Thursday.
As a result, Powerwave will be able to meet its payroll obligations Friday and will be able to continue its operations through Feb. 22, when Powerwave will return to court to ask for further access to its cash. Powerwave said that if it had been unable to tap these funds, it would have had to shut down.
The wireless-equipment maker's Chapter 11 filing this week was precipitated by a fight for cash with Gores Group, which invested $35 million in September. Powerwave Technologies said that on Jan. 25, Gores Group pulled $8.3 million out of its account without notifying Powerwave, saying that the company had defaulted on its loan.
Gores Group has since returned $2 million of those funds, but the missing $6.3 million hurt Powerwave's liquidity so severely that it said it had to move its out-of-court restructuring into Chapter 11.
An additional $1.2 million of that cash was returned to Powerwave Wednesday, the company said during the hearing, but Gores Group won't return the other $5 million and has instead applied it to Powerwave's prepetition debt, bringing the amount down to $30 million.
Powerwave has called this sweeping of cash from its accounts improper and said it still owes $35 million to Gores Group.
Nevertheless, the groups were able to reach a consensual deal, allowing Powerwave to access the cash in its accounts while still protecting Gores Group's investment.
As part of the deal, Powerwave will maintain the right to try to recover the $5 million Gores Group pulled from its account, but it won't be immediately returned. In addition, Powerwave must notify the court and creditors in the case by Feb. 19 whether it plans to sell its business in Chapter 11 or whether it will reorganize without a sale process.
Powerwave bankruptcy attorney Mark Thomas of Proskauer Rose LLP said during the hearing that since Powerwave's "splat" into Chapter 11, as a result of the liquidity crisis caused by the draining of the company's account, "there have been many incoming calls" from interested strategic buyers, including competitors and other publicly traded companies.
The Santa Ana, Calif., company has been losing money and filed for bankruptcy protection Monday. Years of declining demand for its products from customers like Nokia Siemens Networks, Alcatel-Lucent (ALU, ALU.FR) and Samsung Electronics Co. (SSNHY, 005930.SE) pushed down the prices Powerwave could command for its products, which feature technology that improves coverage, capacity and data speed in wireless communication networks.
Combined with the global economic downturn, lower demand and lower prices left Powerwave without the money to continue manufacturing as it had in the past.
It had begun to restructure out of court, selling its headquarters and selling certain technologies to free up cash. The deal with Gores Group was also part of this effort. However, the loss of the $8.3 million made it impossible to continue the process without Chapter 11 protection, it said.
Gores Group said that Powerwave defaulted on Jan. 4, when it showed fourth-quarter revenue of just $23.1 million--revenue less than $51 million constituted a default, and it pulled the cash from Powerwave's account as a result.
Hopes of survival depend on cashing in on the company's patent portfolio, according to papers filed by Chief Executive Ronald Buschur. Mr. Thomas called Powerwave's 243 U.S. patents and 517 foreign patents the "key asset in the estate."
In addition to the September 2012 senior secured loan from Gores Group, Powerwave is carrying about $256 million in bond debt, court papers say.