Nanovation Files for Chapter 11
In a last ditch effort to keep itself alive, Nanovation Technologies Inc., which is working on photonic integrated circuits, yesterday filed a petition for protection under Chapter 11 of the U.S. Bankruptcy Code in a federal court in the northeastern district of Illinois. A preliminary hearing is scheduled for today.
The bankruptcy filing is part of a deal that’s been struck with some of Nanovation’s existing investors under which they’ve provided an unspecified amount of funding to keep the company going for another 100 days. That’s how much time Bob Chaney, Nanovation’s CEO, has got to restructure and relaunch the company, under the supervision of the court.
“Our belief is that we’ve got a very good chance of being able to restructure and re-emerge,” Chaney told Light Reading today, noting that Nanovation still has a fairly healthy balance sheet -- $48 million in assets and $28 million in liabilities. Chaney acknowledged that two other outcomes are also possible: a sale or liquidation.
Nanovation was forced to lay off two-thirds of its 169 employees at the beginning of last week, following the collapse of a $75 million Series C round of financing (see Nanovation in Crisis).
Chaney said that if he manages to pull off the restructuring plan, he hopes to recommence negotiations with some of the potential investors in the C round. Motorola Inc. (NYSE: MOT) has already expressed an interest in doing this, according to Chaney.
Nanovation’s existing customers -- which include Motorola and Turin Networks Inc. “have pledged to stay by our side,” Chaney added.
Chaney also divulged that Lucent Technologies Inc. (NYSE: LU) is a customer. Lucent has commissioned Nanovation to make a photonic integrated circuit comprising a switch and “two or more additional functions” on the same piece of silica-on-silicon, according to Chaney. He says this is very significant because a switch is a “fundamental building block” akin to a transistor in electronic ICs. He pooh-poohed other vendors developing photonic integrated circuits by adding devices to lasers (see Agility Packs Three Into One) or AWGs (arrayed waveguide gratings), saying that wasn't such a big deal. “Lucent is very happy with the progress we’ve made to date,” he added.
The ground-breaking nature of Nanovation’s developments will help the company retain staff over the next 100 days, according to Chaney. They just love what they're doing, he said. “In our view, we’ll have a 90 percent retention rate of our employees.”
Chaney also cleared up a couple of issues raised on the message board following the previous article.
First, Apollo Photonics Inc., the optical circuit design company bought by Nanovation last year, was shut down on the same day that Nanovation laid off two thirds of its staff, July 16.
Second, Nanovation’s big gesture of handing over a $90 million, six-year grant to the Massachusetts Institute of Technology (MIT) was just that -- a big gesture. After Chaney took over as CEO (see Nanovation's CEO Gets The Heave-Ho), he quietly renegotiated the contract to pay for the work MIT had already done. A total of $3 million changed hands, and all work stopped at the end of March.
— Peter Heywood, Founding Editor, Light Reading