SAN FRANCISCO Embattled IC vendor Vitesse Semiconductor Corp. said Monday (Aug. 21) it has receivedand rejecteda purported attempt to collect early payment on $96.7 million in convertible subordinated debentures due in 2024.
According to Vitesse, the notice was sent by the trustee for the 1.5 percent convertible notes. The company said it believes that it is not in default with respect to the debentures, calling any attempt to accelerate the payment "invalid."
Vitesse said it is negotiating to resolve the dispute with a majority of the holders of the debentures. The holders have agreed to instruct the trustee to not take further action with respect to the debentures for a period of 14 days, Vitesse said.
Vitesse said the trustee has asserted that a default occurred when Vitesse failed to make timely filings of its quarterly financial statements with the U.S. Securities and Exchange Commission (SEC). Vitesse, like more than two dozen other companies, has delayed filing its quarterly reports with the SEC pending the results of an ongoing investigation into historical stock options granting practices.
Vitesse said it believes that it has fully complied with its obligations under the indenture for the debentures and that there is no requirement in that indenture for Vitesse to make its SEC filings in a timely fashion. Vitesse rejected the trustee's purported notice of default on May 26 and "rejects the trustee's attempt to accelerate payment of the debentures," the company said.
Though the company does not believe there has been a default with respect to the debentures, Vitesse said it is continuing to negotiate a resolution with the holders of a majority of the debentures to avoid the potential costs and uncertainties of a protracted dispute.
"We are disappointed by the decision of the debenture holders to attempt to accelerate the debt," said Chris Gardner, Vitesse CEO, in a statement. "Vitesse made a good faith offer to resolve this dispute. Unfortunately, the demands by some of the holders of the Debentures have far exceeded anything that we would consider reasonable under the circumstances. We continue to negotiate in good faith for a resolution to this issue, but as we have said, we will not accept a negotiated settlement if we feel it unfair to Vitesse or to our shareholders."