DragonWave’s lenders were in court Monday morning seeking the appointment of a receiver to oversee the struggling telecom company’s business and assets.
The Ottawa-based firm said in a statement that secured lenders Comerica Bank and Export Development Canada want to pursue a short, court-supervised sale process.
The move comes just ahead of DragonWave releasing its own restructuring plan, aimed at stemming years of financial losses.
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DragonWave (TSX:DRWI) (NASDAQ:DRWI), which develops and sells wireless networking equipment, has struggled to be profitable for several years. It suffered a major blow in late 2015 after Nokia – which historically provided a significant portion of DragonWave’s revenue as an original equipment manufacturer sales channel – acquired DragonWave competitor Alcatel-Lucent.
As a result, DragonWave sales through the Nokia channel are expected to rapidly diminish.
Delisting
After markets closed on Friday, the Toronto Stock Exchange suspended trading of DragonWave shares in advance of a meeting Monday afternoon to consider whether to delist the company’s shares.
NASDAQ officials also suspended trading in DragonWave’s shares and are scheduled to start the delisting process on Monday. The U.S. exchange has threatened the move for months over DragonWave’s failure to maintain at least $2.5 million in shareholders’ equity.
The Ottawa-based company said it may consider an alternative listing on the TSX Venture Exchange or the NEX if it’s delisted by the TSX.
Turnaround plan
DragonWave CEO Peter Allen conceded that the company faced “difficult operating conditions” but struck an optimistic tone when he released the company’s first-quarter earnings earlier this month.
Revenues in the three-month period that ended May 31 fell from $12.6 million in 2016 to $9 million this year. Its quarterly loss grew to $4.3 million, which compares with a quarterly loss of $4.1 million a year earlier.
In a call with analysts, Mr. Allen touted DragonWave’s June deal with SmartSky Networks to install Wi-Fi technology on planes as well as its successful cost-cutting efforts that led to operating expenses decreasing by 40 per cent year-over-year.
In May, DragonWave announced it had hired restructuring consultants Alvarez & Marsal Canada ULC to help it identify and assess strategic alternatives. The term is often used by companies considering a sale of some or all of their assets, although the process can also lead to debt or equity financing, business combinations, joint ventures and strategic alliances.
Mr. Allen said earlier this month that he planned to release the results of that review within the next three months.
