Cash-strapped Santa Ana-based Powerwave Technologies Inc. has secured a $50 million credit line amid a recently launched restructuring initiative that will include shrinking its work force and closing some offices.
Powerwave designs and manufactures wireless-communication equipment, including cellular base station products. It got its credit line with P-Wave Holdings LLC, an affiliate of Los Angeles-based private equity firm Gores Group.
Investors sent Powerwave’s share price up more than 90% last week immediately following the announcement of the new credit agreement. Its shares remained in the penny stock range at week’s end with a market value of about $23.2 million.
The new credit line provides Powerwave with an initial $35 million, including $5 million set aside in a reserve account. Powerwave can tap into another $15 million in loans if it meets certain requirements, according to a document filed with the Securities and Exchange Commission.
“The money’s going to fund some of the initiatives the company has and their needs,” said Frank Stefanik, executive vice president at the Gores Group.
$100M
Powerwave can request an additional $100 million under terms of the deal.
P-Wave Holdings was created as a vehicle for the credit agreement and received warrants to buy more than 2.6 million shares of Powerwave stock, which would give it a stake of at least 8%. Terms of the deal stipulate Powerwave must meet minimum revenue thresholds and limit its capital expenditures.
• Headquarters: Santa Ana
• Business: Wireless communications equipment
• Founded: 1985
• Ticker symbol: PWAV (Nasdaq)
• 2011 revenue: $444 million
• Recent earnings: ($42.5 million) for July quarter
• Market value: About $23.2 million
• Notable: Loan deal gives Gores Group affiliate warrants to buy more than 2.6 million Powerwave shares
Powerwave’s stock has been trading below $1 for about four months. Its shares began trading downward after the company reported disappointing quarterly sales in October.
It reported a 75% revenue decline from a year earlier in the July quarter, to $42.4 million. That was well below Wall Street consensus forecast for $53.1 million in quarterly revenue.
$45M Loss
The company lost $42.5 million in the most recent quarter. That was almost twice as much red ink as expected and compared to a $7 million profit in the same period a year earlier.
Powerwave has been trying to conserve capital while taking steps to improve its corporate footing. The effort has included the $49 million sale lease-back of its Santa Ana headquarters in 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.
Nasdaq in June warned Powerwave it has until year’s end to boost its share price above $1 for 10 straight trading days to avoid being delisted. Powerwave also could be delisted based on market value. It has until March 6 to bring up its market value to $15 million—a minimum mark set by the Nasdaq listing rule—and keep it for 10 days, Nasdaq warned in a letter earlier this month.
Planned Layoffs
Powerwave recently filed with the SEC plans to lay off 120 employees worldwide during the next several months. The company has operations throughout the U.S. and international locations including Hong Kong and Sweden.
It isn’t clear if any Orange County layoffs are planned. Powerwave didn’t respond to requests for comment.
