Spansion files for bankruptcy
Spansion Inc has filed a voluntary petition for reorganization under chapter 11 of the US Bankruptcy Code in an effort to restructure its debt.
The action was not entirely unexpected. Damaged by falling memory prices and weakening demand forced by the current economic downturn, the Sunnyvale, Calif-based flash maker in recent weeks has made significant changes as it struggles to stay afloat. After a new CEO took the reins in early February, the company announced it would shed 35% of its workforce in an effort to save $225 million.
That followed statements from Spansion on January 15 that it was looking at its options, including, but not limited to, opportunities to merge with or sell to similar US or foreign businesses. The company also said at that time that it would delay making the interest payment due that day on its outstanding 11.25% senior notes due 2016.
With that, it became clear time that Spansion might be forced to file for bankruptcy. Analysts at the time favored bankruptcy to liquidation, as it typically allows business to continue, keeping product flowing and allowing the company's customers to avoid redesigning products with parts from Spansion's competitors.
"Given our focus on Spansion's future, management and the board have concluded that chapter 11 provides the most effective means for Spansion to preserve its business, meet its post-petition obligations and maintain customer confidence and continuity while we complete this restructuring," said John Kispert, Spansion's president and CEO, in a statement Sunday. "At the same time we will continue to explore opportunities for a strategic transaction to ensure that we are doing all we can to maximize value for our stakeholders."
To be true, Spansion is not the only memory maker searching for financial protection. Germany-based Qimonda AG filed for insolvency in January, hoping to speed efforts to reorganize the company as part of its ongoing restructuring program.
Spansion said its decision to seek chapter 11 protection was made in consultation with an ad hoc consortium of holders of Spansion's $625 million senior secured floating rate notes due 2013. Spansion said it continues to be "actively engaged in constructive discussions" with this ad hoc consortium for as to a reorganization plan that would "permit the company to emerge quickly from chapter 11 in a stronger financial and competitive position and for the continued exploration of multiple proposals from multiple parties seeking a strategic transaction."
The company believes that its current and anticipated cash resources will be sufficient to pay its expenses and maintain its business operations while it explores and implements options to address its long-term cash needs. Among other things, the company is in discussion with the ad hoc consortium about providing a debtor-in-possession (DIP) credit facility, while also simultaneously pursuing other options intended to provide the company with additional liquidity for its long-term cash needs.
"With our valuable portfolio of industry leading products and technology, we believe Spansion has a promising future," Kispert said. "By focusing on embedded flash memory products, IP solutions, and the profitable portions of the wireless segment, we believe Spansion can leverage its diverse product portfolio and customer relationships while we continue our restructuring process and explore opportunities for a strategic transaction."
Spansion noted that each of its domestic subsidiaries have filed their voluntary petitions for relief under chapter. Spansion's Japanese subsidiary, Spansion Japan Ltd, voluntarily entered into a proceeding under the Corporate Reorganization Law (Kaisha Kosei Ho) of Japan on February 9 to obtain protection from its creditors as part of the company's restructuring efforts.
None of Spansion's subsidiaries in countries other than the United States and Japan are included in the US or Japan filings.