FiberCore: battle to avoid Tyco takeover of board

Fiber-optic cable maker FiberCore faces a double battle to avoid minority owner Tyco taking control of its board. On the one hand, the board must secure USD 5 million in financing or restructure debt ..

Fiber-optic cable maker FiberCore faces a double battle to avoid minority owner Tyco taking control of its board. On the one hand, the board must secure USD 5 million in financing or restructure debt to retain control of the company. On the other, the threatened delisting from Nasdaq could also let in Tyco. In a 19 May 2003 filing with the Securities and Exchange Commission, the Charlton, Massachussetts.-based manufacturer of specialty fiber-optic cables said it is in default on loan agreements with holders of the company“s convertible debt. That could cause FiberCore to default on an USD 8.5 million credit facility from FleetBoston Financial Corp. and a USD 1.5 million loan from a German subsidiary of Tyco International Ltd. If FiberCore fails to repay the Fleet facility, Tyco, which owns 15% of the company, will assume the bank“s debt and “would have the right to assume control of the company“s board of directors,” according to the filing. Tyco is a Bermuda-based industrial and electronics conglomerate. FiberCore also faces delisting on Nasdaq. If that should happen, convertible debt issued to lenders Riverview Group LLC, Laterman & Co. and Forevergreen Partners could cause a cross-default on the Fleet loan, which also would let Tyco gain control of FiberCore“s board. The Nasdaq Small Market exchange was set for a 22 May 2003 hearing on FiberCore“s delisting. According to one New York technology market analyst, FiberCore is unlikely to attract a “confident investor,” given the depressed state of the optical cabling sector. Growing competition from Chinese fiber-optic cable companies is forcing North American and Japanese providers, such as Corning Inc. of Corning, N.Y., and The Furukawa Electric Co. of Japan, to cut manufacturing capacity and prices. That is having a knock-on effect on small niche companies like FiberCore. For 2002 FiberCore reported a net loss of USD 0.48 per share on sales of USD 25.6 million. For the 4Q it reported a loss of USD 0.24 per share on revenue of USD 5.1 million. The company had USD 1.4 million in cash at the end of the 4Q. It had notes payable of USD 17.6 million and total long-term debt of USD 36.8 million. In October 2002, FiberCore completed a USD 22 million financing in the form of loans from Deutsche Kreditbank AG and grants from the German government to expand its plant in Jena, central Germany.