Alvarion’s board will not object to the petition filed by Silicon Valley Bank to appoint a receiver for the company.
Alvarion : In its great days
/ By Shiri Habib-Valdhorn and Efrat Peretz /
Alvarion Ltd. (Nasdaq: ALVR; TASE: ALVR), founded in 2001 through the merger between broadband wireless access companies BreezeCOM and Floware, has reached the end of the road as an independent company. Its board of directors today announced that it will not object to the petition filed by Silicon Valley Bank on Thursday to appoint a receiver for the company and enforce liens on the company’s $3.2 million debt to the bank.
In a separate development today, Alvarion’s employees petitioned the Tel Aviv District Court to appoint a liquidator for the company.
At its peak, Alvarion, at the time the market leader in Wi/MAX technology, had a market cap of nearly $1 billion, but falling sales, deepening losses, write-offs, and the burning of cash in recent years resulted in financial difficulties. The company’s collapse is not a surprise after years of financial difficulties and failed attempts to stabilize the business, including the acquisition of Wavion in 2011 in order to enter the Wi-Fi market.
Despite Alvarion’s shaky condition, just three weeks ago, Clal Finance Underwriting Ltd. invested $1.2 million in the company for a 9.36% stake in it. The investment came just days after Alvarion raised $2 million from Yorkville Advisers LLC and other private investors, which nonetheless did not stem the slide in Alvarion’s share.
Clal Finance said today in response, “The company decided to invest in Alvarion from its nostro account, after Alvarion presented an order and wide-ranging recovery plan that includes sharp cutbacks in personnel and other spending items. The plan also included the write-off of debts and agreements with creditors, including Silicon Valley Bank.
“Alvarion also presented a revenue growth projection. Our investment was intended to help its working capital solution. The action by Silicon Valley Bank last week contravened the presentation to Clal Finance Underwriting before the investment. Clal Finance Underwriting is studying the facts and examining its position in view of the developments.”
Doubt whether July salaries will be paid
The employees’ petition for Alvarion’s liquidation states that in May 2013, the company’s cash flow situation deteriorated, and from that point, it stopped payments for managers insurance, pension and training funds, and deductions from employee salaries for social benefits. It also halted employer provisions for these benefits. The petition adds that there is doubt about the company’s ability to pay salaries for July, and that employees fired in the preceding months had not received severance and other rights. It estimates the debts to employees at over NIS 7 million, and that CEO Assaf Katan had notified the employees that the company’s debts to its creditors (excluding employees) exceeded $11 million.
“To the best of the employees’ knowledge, as of the date of filing of this petition, the company is almost empty of cash, ” states the petition. “One of the main factors for the deterioration in the company’s condition was the frequent replacement of CEOs. Since 2009, there have been four CEOs, apparently because of managerial problems and bad decisions. Another major problem is the $30 million loan from Silicon Valley Bank of the US. Although the company was in breach of the loan covenants and was forced to return most of the loan in 2012, the process cost the company heavily.”
The petition adds, “The employees are worried that the company has used proceeds from these injections in contravention of the legal creditor arrangements.” The employees believe that the appointment of a temporary liquidator will allow Alvarion to collect NIS 18.5 million owed by customers. “There is concern that (Alvarion’s) creditors will take the law into their own hands and take over its assets and/or cause it harm.”
Published by www.globes-online.com