Tester manufacturer on the verge of emerging from bankruptcy protection

Acterna Corp.'s (www.acterna.com) battle to emerge from Chapter 11 is just about over.

Acterna Corp.'s (www.acterna.com) battle to emerge from Chapter 11 is just about over.

The test equipment manufacturer has filed its proposed Plan of Reorganization and Disclosure Statement with the U.S. Bankruptcy Court for the Southern District of New York.

Grant Barber, CFO for Acterna, based in Germantown, MD, says the newly-restructured company is now poised to be an even stronger player in the industry. "The telecom field was strong in 2000, and we were a major player," says Barber. "And we still are today."

If the plan works, Acterna will exit Chapter 11 as a privately held company with long-term debt of approximately $190 million and quarterly cash interest expense of less than $2 million. Holders of Acterna's current convertible and subordinated notes will receive warrants having diminimus value. Unsecured creditors will receive a cash distribution of approximately 10% of their claims. Equity holders will receive no distribution under the terms of the plan.

Barber says Acterna's efforts to reemerge began when company representatives held discussions with bank groups early this year.

A chief officer was hired and brought onboard to supervise Acterna's internal management team, and the company filed for bankruptcy on May 6. "Their expertise was critical for us as we went into Chapter 11, and now we will emerge in better shape, quicker than we could have done it on our own," says Barber.

Acterna then sold non-strategic subsidiaries, and the proceeds from the sales were used to pay down the manufacturer's debt. Included was the sale of Airshow—a provider of airplane cabin management solutions—to Rockwell Collins. Acterna likewise divested in its attempts to enter the wireless test equipment market.

The company also shut down 19 factories across the country, consolidated its Cable Network Division, and moved its manufacturing base operation to Indianapolis, IN. It also consolidated its European branch offices.

"This will help us to better match the business we are in, and to emerge with a focus on those markets," says Barber. "This will literally get us to prioritize R&D, and be a bigger player."

Acterna's plan of reorganization is designed to reduce the company's long-term debt by $770 million, or 80%, and lower its annual cash interest expense by at least $45 million. Assuming court approval, Acterna expects to emerge from Chapter 11 protection this month.

As of June 30, Acterna had $53 million of cash on hand. The company also has access to a $30 million debtor-in-possession credit facility arranged by a group of banks led by JP Morgan Chase Bank and General Electric Capital Corp. The terms of Acterna's plan of reorganization call for a debt-for-equity swap that will give its senior secured debt holders 100% of the company's equity.

Acterna still has branch operations in 80 different countries, but Barber admits the company has a significant challenge before it.

"Today's telecom market is pretty cursed," says Barber. "We've contracted, and looked at areas that we can dominate when it snaps back."

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