Microtec seeks court protection

A major creditor not in agreement over debt restructuring, forces filing
Wednesday, December 1, 2004

ST. AUGUSTIN, Quebec - Microtec Enterprises has hit a snag on its road to recapitalization in the form of an uncooperative creditor, forcing it to file for protection under Canada’s Companies’ Creditors Arrangement Act.
The full-service security provider has made numerous attempts to address the needs of its creditors, who until now have provided the company with five extensions with its credit facilities this year. Tardif said one of its major creditors, GE Capital, has not approved any of the company’s plans to improve its situation and that propelled the CCAA filing.

“They had refused the plan that we had,” Tardif said. “We have a chance (through the filing) to say to them that’s enough. Now give us time and give us what we need to complete our recapitalization plans.”

The filing, which according to Jack Mallon, managing director at Mallon Associates, is comparable to a Chapter 11 filing in the United States. But Daniel Tardif, communications director with Microtec, said the company is not close to hitting that mark.

“We are far from bankruptcy,” Tardif said.

But Tardif acknowledged that the company, which has struggled to find solid ground this year as it attempts to reorganize, needs to find a way to address its debt problems.

“We do want and need the necessary cash to lower our debt,” he said. “We understand that.”

It has been a long year for Microtec as the company has faced a number of road blocks on its way to reducing its debt including a unsolicited offer from Securex, a financial provider to the security industry, who grabbed almost 19.9 percent of the company’s subordinate voting shares. Then in early fall, Microtec’s board of directors’ insurance coverage was yanked, forcing six board members to resign. At that time, industry insiders suspected the company, which is rumored to have been on the market for a period of time, was making room for a new investor to come in.

Now the company has to address its large amount of debt, which Mallon said is unfortunately in line with some of its colleagues.

‘It’s just another sad example of an alarm company that took on too much debt,” Mallon said.

Tardif said the protection provided from the CCAA filing is beneficial to the company.

“In fact it’s good news for us,” he said. “We are in a very good position and many companies are interested in investing.”

For now, the company, which employs roughly 300, will continue working on a plan that works for it and its investors into 2005.

“The end of the year may be too short (to complete an approved plan,)” Tardif said. “We are planning for February.”