Nanovation files for Chapter 11

Aug. 2, 2001
The move is in response to tough market conditions and the collapse of a critical fundraising round.

Tough market conditions and the collapse of a critical fundraising round have forced Nanovation Technologies Inc. (Northville, MI), a designer and manufacturer of integrated optical components for the telecom market, to lay off 115 employees (2/3 of its total workforce) and file for Chapter 11 bankruptcy protection.

At the end of June, Nanovation was undergoing its $75 million Series C round of funding and had secured a $10 million bridge with Motorola Inc. (Schaumberg, IL) as the lead investor. As a result of this round, Nanovation required shareholder approval for the issuance of additional shares for this offering. Approximately 99% of the shareholders approved the issuance of the additional shares. However, Stamford International Inc. (Toronto, Canada), the largest common shareholder (with a 40% interest), blocked the deal for nearly 2 weeks--resulting in Motorola�s withdrawal of support on July 13.

Following the collapse of the Motorola-led $10 million bridge round, Stamford International submitted a proposal to infuse cash into Nanovation in exchange for control of the Board of Directors. Nanovation declined this offer and filed for Chapter 11, as part of a deal struck with investors who promised to continue backing the company for 100 days to give it a chance to restructure and relaunch.

“Nanovation enters Chapter 11 with $48 million in assets, $28 million in liabilities, and strongly believes a successful restructuring is a strong possibility,” says Nanovation CEO Bob Chaney. “Nanovation�s customers-including Motorola-have pledged to stay by our side during this process, and we still expect to deliver photonic integrated circuits to them in the fourth quarter of this year.”

If the restructuring and relaunch efforts fail, Nanovation has acknowledged that options, such as a sale or liquidation, still exist.

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