"Xtera Communications, Inc. (NASDAQ: XCOM) is a leading provider of high-capacity, cost-effective optical transport solutions, supporting the high growth in global demand for bandwidth. Xtera sells solutions to telecommunications service providers, content service providers, enterprises and government entities worldwide. Xtera’s proprietary Wise RamanTM optical amplification technology leads to capacity and reach performance advantages over competitive products. Xtera’s solutions enable cost-effective capacity to meet customers’ bandwidth requirements of today and to support their increasing bandwidth demand fueled by the development of data centers and related cloud-based services". From the Linked In Profile.
On November 15 2016, the Company filed for bankruptcy.
BDC Credit Reporter View
The Company-which only came public in 2015-began to have operational and liquidity problems early in 2016. A major blow was the cancellation by Foxconn of their master manufacturing agreement after the Company was not able to pay its bills. Not unexpectedly as staffing levels had dropped by 80% as had sales and losses were mounting, the Company filed for bankruptcy protection on November 15, 2016. The Company reports $50mn in assets and $66mn in debts. A buyer has stepped offering $10mn for the Company, including DIP financing to keep the business operational.
Only one BDC has exposure to the Company: Horizon Technology Finance or HTF. $3.8mn is invested in First Lien debt and $0.2mn in equity. The debt has been on non-accrual since the IIIQ of 2016. The equity has been written down to zero for years, but the debt was carried at par through the end of the IIQ of 2016, and was written down by 27% at the end of the IIIQ. The BDC Credit Reporter believes there will be little recovery likely given the dire financial condition of the Company and a further write-down from the $2.8mn FMV is likely and a Realized Loss might ultimately be booked between $3mn-$4mn. Annual investment income lost is about $0.5mn on this previously high yielding loan. As a result, we have the Company Status as Non-Performing, the Corporate Credit Rating as a 5 (reflecting expected losses) and the Credit Trend as Down, reflecting our belief further write-downs might be necessary.