The company has announced that it has succeeded in obtaining forbearance on the two defaulted loans at an acceptable cost.
This is a game changer, effectively putting Unitek Global back on track.
The forbearance agreements come with fees, interest hikes, and additional interest, which is regrettable, but without a doubt necessary. Fortunately, these additional costs will stand in contrast to the final earn-out payment due in 2013, which will not, I guess, be made. Moreover, my hope is that the company will be pursue whoever has defrauded it to recoup the consideration paid for Pinnacle and all costs incurred through this corporate governance nightmare.
The agreement also sharply increases the oversight by the bank, which I really like. Clearly, anything that forces the company to step up its corporate governance is a good thing.
Please join me in congratulating the company's management on a job well done.
You wrote: "The only problem is if the current CEO knew what was going on then he should go too!!!! Can't imagine Unitek winning any new business either. They still have a lot of scary times ahead of them."
I don't see this affecting business in a material way, but, of course, I may be wrong. Certainly, if my plumber has an assistant that steal from his petty cash, it would not, in any way, affect my decision to use the plumber... I mean, why would it?
With respect to the CEO, yes, if he is involved in something unsavory, he, too, should of course be terminated -- as should anyone who knew about the problem and did not report it or otherwise stop it, participated in the problem, or managed processes and procedures that were weak enough to allow the problem to occur.
However, the reality is that the problem is centered around the time up to and including the third quarter and did not carry into the fourth quarter (as confirmed in the forbearance agreements,) and the new CEO came aboard during the third quarter and, frankly, probably did not know enough to participate materially in the business (yes, I know he was there and probably was busy establishing himself and securing his position, but that is not -- at all -- the same as participating.)
In my view, in fact, the fact that there is no expected restatement for the fourth quarter, indicates that whatever activities were going on stopped after the new CEO came aboard, and were uncovered during or around the time of the annual audit, which is probably the first time the CEO would have had an opportunity to look at what had gone on in the first three quarters of the year. In my book this is a good indication that he was not, at all, aware or participating in the problem.