Will the sale of Alvarion Ltd. (Nasdaq: ALVR; TASE: ALVR), which is in receivership, be completed within a month? On Sunday, Tel Aviv District Court Judge Eitan Orenstin approved the 30-day operating plan submitted by receiver Yoav Kfir. This gives a deadline of August 23.
The financially troubled wireless communications equipment provider ended up in receivership in early July, after it could not service its debts. "This company was once a flagship of Israeli high tech," Kfir told the court yesterday. His preliminary report to the court details the company's crash in numbers.
At its peak, Alvarion employed 1,100 people. The report states that it fired 800 employees over the past few years. Its current workforce numbers 98 employees at its Rosh Ha'Ayin headquarters (to which it recently moved from Ramat Hahayal in Tel Aviv, to cut costs), and 39 employees in Yokne'am, who joined the company as a result of the acquisition of Wavion Networks in 2011.
Alvarion's employment cost is $70,000 a day. All the employees received layoff notices last week, as part of the receivership process. In order to keep Alvarion as a going concern, to support customers and work with suppliers, and to obtain the maximum proceeds to help repay creditors' debts, various ways were discussed to compensate employees until the sale is completed.
The operating plan that was approved on Sunday calls for the employment of 55 people for 30 days at cost of NIS 10,000 per employee. The employees will receive the rest of their salary and social benefits at the end of the period (or the period will be extended), and they will also receive a bonus of a half month's full salary for each month of work. Five pregnant employees will receive full salaries with no bonus to avoid damaging their rights. The total salary cost for the period is $167,000.
Alvarion owes $24 million, although Kfir states in his report that the information is incomplete. Silicon Valley Bank, which initiated the receivership proceedings, is owed $3.3 million; suppliers are owed $17.5 million; the debt to employees is $1.6 million; and the rest are debts to municipalities, the Office of the Chief Scientist, and the banks. Alvarion's landlord in Yokne'am claims a debt of NIS 88,000 for non-payment of electricity, and says that if the debt is not paid, he will seek to evict the company by August 1.
Alvarion had $370,000 in cash last week, after Kfir collected $200,000. "On the basis of expected collections from customers in July, an addition $1 million is due to be collected," states the report.
These amounts are a drop in ocean compared with Alvarion's current debts, but it has other assets, which are estimated at $23 million. This figure includes $12.5 million balance to customers, $7.2 million in inventory at suppliers and $850,000 at the company's warehouses, and $2.5 million in fixed assets.
Telrad Networks Ltd. claims it has rights to $5 million from Alvarion, according to a letter to Kfir from Telrad's lawyer, Adv. Dror Vigdor of the Yigal Arnon & Co. law firm.
As part of the efforts to improve its financial situation, in late February, Alvarion sold its Wi/MAX business to Telrad for an amount which could reach $12 million. The deal was closed in May, and Alvarion transferred all the assets of its Wi/MAX division, including rights from customers, commitments to suppliers, and intellectual property. According to Kfir, Alvarion was promised $4 million under the deal, of which $1.35 million has been paid, and the balance is in post-dated checks over the coming year. However, some of the commitments have not yet been completed.
Vigdor stated in his letter that, at the closing of the deal, Alvarion promised Telrad that it was not insolvent, and that it would not become insolvent, and would be able to meet its commitments. "Obviously, Telrad relied on the statements and sellers' presentations (Alvarion and its subsidiaries - S.H.V.) that all the commitments in the agreement would be met as stated," he said.
"The problem is that Telrad has realized that the sellers have held back money which belongs to Telrad under the agreement (such as money that Alvarion received from third parties which contracted with it agreements that are part of the assets sold to Telrad)." Vigdor adds that Telrad "was very surprised to hear from the media" about the petition for receivership.
Kfir states in his report that he is in intensive talks with Telrad "to review its possible investment in the company (Alvarion), and to complete payment of the stated amount which has not yet been paid to the company as mentioned, while reviewing Alvarion's ability to meet its commitments to Telrad."
Published by Globes [online], Israel business news - www.globes-online.com - on July 22, 2013
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