November 28, 2008 / 9:22 PM / 10 years ago

Defense firm Allen-Vanguard again defers debt

OTTAWA, Nov 28 (Reuters) - Allen-Vanguard Corp VRS.TO shares lost nearly 17 percent of their value on Friday after the security equipment maker said it would delay until Dec. 10 a C$10 million ($8.1 million) debt payment that was due today.

After buying rival Med-Eng Systems for C$600 million last year, the company said it initially paid back debt rapidly, but has not been able to make payments since Sept. 30. It blamed big order delays from the U.S. government.

The company, which had outstanding debt of C$188 million on its C$200 million term loan as of Aug. 31, said its lending syndicate agreed to defer covenant compliance and a C$10 million payment initially due Sept. 30.

“Our lenders continue to work with us and to provide support in our efforts to recapitalize the company, and we expect to conclude on a preferred transaction prior to December 10,” Chief Executive David Luxton said in a statement Friday.

“We understand that there continues to be uncertainty about our working capital position and our ability to fund our growth.”

Allen-Vanguard shares lost 2 Canadian cents to close at 10 Canadian cents on the Toronto Stock Exchange on Friday. Last September, they were worth C$11.95.

The Ottawa-based company, which specializes in jamming systems that prevent the detonation of remote-controlled bombs, said two weeks ago that it was in talks with potential investors to secure working capital and explore “recapitalization alternatives”.

It also said revenue in its fourth quarter rose nearly 50 percent over the third quarter to about C$45 million and that it started the first quarter with an order backlog of C$120 million.

After recording 75 percent of its annual revenue in the first half of the year, sales trailed off, reflecting the unpredictable timing of military contracts.

In September, Allen-Vanguard cut 15 percent of its staff and closed offices to reduce costs by C$40 million annually. ($1=$1.23 Canadian) (Reporting by Susan Taylor; editing by Rob Wilson)

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