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3 June 2009


Bank calls in Aviza’s $29.5m debt

According to a filing with the Securities and Exchange Commission (SEC) last week, on 20 May United Commercial Bank sent etch and deposition equipment maker Aviza Technology Inc of Scotts Valley, CA, USA a demand to pay an outstanding debt of about $29.5m. Aviza is in default of an April 2007 loan and security agreement that has already been amended twice last September/October.

Previously, in late April, Aviza said that, after the resignation from its board of directors of C. Richard Neely Jr (designated as its 'audit committee financial expert'), it was not in compliance with audit committee composition requirements under Rule 5605(c)(2)(A) of the Nasdaq Listing Rules, since only two members of its audit committee remained.

Then, on 11 May, the firm missed the SEC financial report filing deadline for its fiscal second-quarter (ended 27 March). On 14 May it was notified by the Nasdaq Stock Market that it had 60 days to submit a plan to regain compliance with the obligation to file periodic reports under Rule 5250(c) of the Nasdaq Listing Rules. If Nasdaq accepts the plan, Aviza may be granted an extension of up to 180 days from the filing’s due date (i.e. until 9 November). Otherwise, the firm is threatened with delisting from Nasdaq.

Aviza has been hard hit by the recession’s effect on the DRAM memory chip market. Already, to decrease its overall dependence on the DRAM market, the firm had been downsizing its programs, products and spending related to trench capacitor technology for DRAMs, involving ceasing development of large batch thermal systems. Meanwhile, in April last year, Aviza announced a restructuring of its product strategy, served markets and internal operations to refocus on growth market segments with its single-wafer products, including its core strengths in atomic layer deposition (ALD) technology for the sub-45nm nodes, and PVD and etch technologies for the 3D-IC, MEMS and III-Vs markets.

Nevertheless, at the end of this April, Aviza lowered its fiscal second-quarter guidance for revenue from $13-18m to $9.5-11m (less than half of last quarter’s revenue of $25.2m and a third of $30.2m a year ago). It also raised it forecast for adjusted net loss from $1-5m to $5-6m (excluding restructuring charges of $9-10m), compared to last quarter’s adjusted net income of $4.9m.

When Aviza gave its initial guidance in early February, it said that fiscal Q2 would be challenging, as the firm continued to face an unpredictable environment for orders and weakness in customer demand. It added that it would continue to institute shut-down days at varying times and locations. US staff were required to take off one Friday every two weeks (amounting to a pay cut of about 10%) while similar cuts took place internationally. Board members and senior management also accepted a 20% cut in fees and salaries. Previously, Aviza cut 18% of its staff and contractors last year and about 90-110 more in the December quarter. Of 380-400 staff, about 100 are based in Scotts Valley, with the rest at its manufacturing plant in Wales, UK and support facilities in the UK, Germany, France, Taiwan, China, Japan, Korea, Singapore and Malaysia. Aviza has been trying to sell its headquarters in Scotts Valley for some time.

In early January this year, Aviza said that, to preserve financial resources in the interim, it had engaged Needham & Company LLC to help in reviewing and pursuing financial and strategic options to maximize value on behalf of stakeholders (including either merging with another company, selling its assets, or liquidating or dissolving the firm through bankruptcy proceedings).

Last week, Taiwan’s DigiTimes reported that Aviza has been in contact with Taiwan-based equipment makers Foxsemicon Integrated Technology and Csun Manufacturing about a buyout, but that the two companies are only interested in acquiring Aviza’s intellectual property, not the whole firm. Founded in 2001, Foxsemicon provides products for LED and renewable energy applications. Csun specializes in the semiconductor and flat panel display (FPD) equipment markets.

See related items:

Aviza slashes March-quarter revenue guidance

Aviza’s accelerated cost cutting yields profit despite 29% sales drop

Aviza to exceed profit guidance for December quarter

Aviza increases gross margin after restructuring

Aviza expects revenue at low end of guidance, but raises guidance for income

Aviza cuts guidance and restructures

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