By John Geralds, VNU Net
Troubled software vendor Corel has lined up more than $50m in
new financing which it hopes will enable it to implement its
turnaround plan.
An unidentified institutional investor will buy as many as 14.7
million shares, or about 20 per cent of Corel stock, during the
next two years. The buyer will receive the stock at 95 per cent of
the average prices during the two-year period.
Corel has been in trouble since a proposed merger with
Inprise/Borland, which had $240m in cash reserves, was called off
in May this year when shareholders in that company balked at the
terms of the deal.
Corel’s share price closed at $3.66 on Wednesday, which if the
investor buys all the stock at 95 per cent of that price – which is
unlikely to happen – puts the total financing at just more than
$51m.
The institution will buy the shares at periodic intervals during
the next two years, but there is a get-out clause for Corel if the
deal is not working for it.
Corel already has cash reserves of more than $7m and the new
injection was described by one analyst as a “safety net”.
John Blaine, Corel’s chief financial officer, characterised the
financing as the company’s “personal line of credit”. He added: “We
expect that it will give us the flexibility to pursue our strategic
goals. This transaction is an important part of the solid
foundation we are building to support the company’s long-term
growth.”
Corel’s interim president and chief executive, Derek Burney, who
took over when founder Michael Cowpland quit in mid-August,
describes the financing as the second of a three-part plan to
regenerate the troubled software company.
Phase one was announced early this month when Corel planned to
save $40m a year by closing an office in Dublin, affecting 139
jobs. The company expects to outline the third part of the strategy
– the realignment of its organisational structure – by the end of
this month.
For its second quarter, which ended 31 May, Corel posted an
operating loss of $23.6m on sales of $36.6m. That sales figure was
down 48 per cent from the second quarter in 1999. The company is
expected to release its third quarter figures on 27 September.