Santa Ana-based telecom equipment maker Powerwave Technologies Inc. is mounting its last defense to keep its doors open.
The cash-strapped company, which filed for bankruptcy protection last month, has filed a motion in bankruptcy court in Delaware to regain access to bank accounts recently seized by a creditor.
Powerwave intends to use the cash reserves of nearly $3.3 million for payroll and positioning the company or assets for a sale.
The creditor, P-Wave Holdings LLC, an affiliate of Los Angeles-based private equity firm Gores Group, has sought to dismiss the motion and liquidate the company if a restructuring plan can’t be reached by both parties, according to court documents.
“The debtor has suffered persistent significant operating losses, declining revenues, increasing concentration of product sales among certain customers and difficulty collecting on certain customers,” P-Wave Holding said in court documents. “It has no realistic long-term plan for overcoming these financial and operating hurdles.”
Defaults
Powerwave’s outstanding $35 million credit line from P-Wave went into default on Jan. 24, triggering the account seizure.
The company’s subsequent Chapter 11 bankruptcy filing set off a string of defaults involving leases, debt and credit lines.
The defaults, disclosed in a recent regulatory filing, include loans of more than $250 million from Deutsche Bank Trust Company Americas.
Powerwave designs and manufactures antennae, filters and other equipment for cell phone towers.
It has been trying to conserve capital, an effort that included a $49 million sale and lease-back of its Santa Ana headquarters last fall. It also sold off its assets and inventory at its former facility in Suzhou, China, in a $12.5 million deal with Shenzhen Tatfook Technology Co.
It appears both of those deals are now in jeopardy due to the bankruptcy filing, according to documents filed with the Securities and Exchange Commission.
Powerwave in the SEC filing also disclosed that it terminated a supply agreement with Tatfook that was part of the asset sale. It said it severed the three-year contract after Tatfook imposed a credit line “contrary to the terms of the supply agreement.”
The company also said that it’s in default on the lease at its headquarters.
Last month it was delisted from the Nasdaq and now is trading on the over-the-counter stock market.
The company has been trying to sell all or part of its business lines since November, contacting more than 50 potential buyers, according to court documents. A strategic buyer has not been found, either.
Troubles Since 2011
Powerwave’s bankruptcy had been expected amid mounting financial problems that began in October 2011, when it reported that third-quarter sales plummeted 51% from a year earlier to $77.1 million.
Since then the company has been seen declining sales linked to a significant slowdown in equipment spending by Dallas-based AT&T Inc. and other North American network operators.
Powerwave has “effectively ceased operations,” P-Wave said in court documents. “The debtor projects no sale of inventory through Feb. 22 and has no production of additional inventory.”
The company posted sales in the September quarter of $42.1 million, down 45.3% from a year earlier. It reported a loss of $52.7 million, compared to a loss of $35 million a year earlier.
It lost $153.1 million through the first nine months of 2012, compared with a net loss of $25 million in the same period in 2011. Creditors are scheduled to meet on March 14.
