A Canadian telecommunications company is in dire financial straits, and the situation is not looking up.
In a string of bad news, Ottawa-based DragonWave Inc. has announced the resignation of four of its board of directors, as well as the court-directed appointment of KSV Kofman Inc., a Canadian restructuring and valuation firm, as receiver and manager over all its property, assets, and activity.
Trading of the company’s stock has also been suspended on the New York-based NASDAQ and on the Toronto Stock Exchange (TSX), with NASDAQ expected to delist DragonWave’s shares on Aug. 2 and TSX on Aug. 30.
DragonWave’s chairman of the board and company director Claude Haw, president and CEO Peter Allen, and company directors Cesar Cesaratto and Lori O’Neill have resigned from their positions at the microwave transmission technology company, which sells its tech to communications carriers as a substitute for more expensive fibre-optic systems.
With the Ontario Superior Court of Justice (OSCJ) naming a receiver for the company, KSV becomes an “officer of the court and acts on behalf of all creditors,” according to PwC, which notes that receivership and bankruptcy are not mutually exclusive. As of Aug. 1, DragonWave has yet to declare bankruptcy.
However, its two main creditors, Comerica Bank and Export Development Canada, have made it clear that their goal is to initiate a “short, court-supervised sale” of the company’s assets, which is to be conducted by KSV to “maximize value for lenders and other stakeholders,” says a company press release.
Comerica Bank announced its repayment demand of USD17.24 million on July 20 along with a notice of intention to enforce security under the Bankruptcy and Insolvency Act (BIA), meaning it wanted to be repaid and was giving DragonWave a 10-day period before it essentially took control.
DragonWave responded at the time that it would “continue to pursue alternative financing; however, there is no assurance that the Corporation will be successful in securing such financing, or if such financing discussions will be sufficiently advanced in the next 10 days when the notice period set out in the Notice of Intention to Enforce expires, at which time Comerica Bank and Export Development Canada may seek to take steps to enforce the security.”
On July 21, DragonWave provided an update on its financing efforts, saying it was “in negotiations with potential sources of alternative financing to address the repayment demands,” and just days later, announced the application of KSV as receiver within the OSCJ.
These financial woes come after reported annual sales of USD158 million in fiscal 2015, which somehow still managed to result in a USD21 million loss that year, according to the Ottawa Citizen. DragonWave also experienced a severe technical glitch in a new product being shipped to India that year, and the cherry on top was the completion of Finland-based telecommunications networking giant Nokia’s merger with Alcatel-Lucent, one of DragonWave’s direct rivals, in 2016.
IT World Canada has reached out to KSV for comment, but it has yet to respond.
