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Riverstone in Debt Dustup

Riverstone Networks Inc. (Nasdaq: RSTN) is at odds with one of its debt holders as to whether it is in default, according to a filing the company made today with the Securities and Exchange Commission (SEC).

In the filing, Riverstone says it received a letter from a debt holder claiming that the amount Riverstone owes -- $1,570,935.82 in principal, interest, and damages -- is immediately due.

The trustee claims that, because Riverstone has delayed filing its annual report (Form 10-K) with the SEC, the amount Riverstone owes is due. The trustee -- the agent of a bond issuer who handles all the administrative aspects of the debt holder's loan to Riverstone -- argues that Riverstone is required in its contract with the bond issuer to file its annual report within 60 days of receiving notice from the trustee.

Riverstone disagrees with the trustee's claim, and the company says it has sent a letter saying as much. In the filing, Riverstone also cautions that it may not be able to afford the debt repayment, if the entire amount it owes were due all at once.

Of course, this new wrinkle shouldn't come as a shock. Riverstone's downward financial spiral is well documented. Here are links to this year's developments, with the most recent items listed first:

Riverstone's accounting practices are still being reviewed by a special, board-appointed committee. Riverstone says it will file its annual report and quarterly earnings statement, along with any earnings restatements, as soon as the company finishes internal gazing.

Riverstone shares were down $0.08 (5.71%) to $1.32 in early afternoon trading on Friday.

Calls to Riverstone on Friday morning were not returned.

— Phil Harvey, Senior Editor, Light Reading

DoTheMath 12/4/2012 | 11:24:22 PM
re: Riverstone in Debt Dustup Does anyone have any insight into why Riverstone seems to have self-destructed? I have followed them from their Yago days (pre Cabletron acquisition), and my impression was that it was a solid product and a solid team. When Riverstone was spun-off essentially with that ex-Yago team, I though it confirmed my impression - Cabletron didn't get a lemon. Riverstone also seemingly did OK for some time, post spin-off.

Their ex-CEO (used to be CTO of Yago) came across, at least to this casual observer, as a knowledgeable techie, not a hypester or a fraudster. So it is all the more surpising that they seem to have just imploded. Can anyone shed some light?
skeptic 12/4/2012 | 11:24:21 PM
re: Riverstone in Debt Dustup Does anyone have any insight into why Riverstone seems to have self-destructed? I have followed them from their Yago days (pre Cabletron acquisition), and my impression was that it was a solid product and a solid team. When Riverstone was spun-off essentially with that ex-Yago team, I though it confirmed my impression - Cabletron didn't get a lemon. Riverstone also seemingly did OK for some time, post spin-off.
------------------
In my opinion they started playing accounting
games \because everyone else is doing it\ and
things just got out of control.

They might have recovered from that, but for
unknown reasons they can't seem to come up with
a clear and convincing set of books to show
the outside world. They needed to sit down and
quickly clean up their books. But they just
could not seem to do it and I dont know anyone
who understands why.

Its also (speculating) like the books are so
badly messed up that nobody even understands
the basic structure of the business.

Basically, they have "fallen" and they dont
know how to get back up.
green 12/4/2012 | 11:24:19 PM
re: Riverstone in Debt Dustup I haven't heard anything bad about their products per se. in a downturn even decent companies get crushed when customers turn extremely conservative and only buy from the big boys (cisco etc.,).
DoTheMath 12/4/2012 | 11:24:19 PM
re: Riverstone in Debt Dustup skeptic, thanks for the insight. Is my original impression that they had a solid product correct? Is it a good product or do the problems go beyond accounting?
DoTheMath 12/4/2012 | 11:24:18 PM
re: Riverstone in Debt Dustup green wrote>I haven't heard anything bad about their products per se. in a downturn even decent companies get crushed when customers turn extremely conservative and only buy from the big boys (cisco etc.,).
-----------------------------------------
I haven't either. But the issue here seems to go beyond the downturn, and to outright accounting fraud. After all Foundry is doing well, Extreme is hanging in there.
futureisbright 12/4/2012 | 11:24:07 PM
re: Riverstone in Debt Dustup it's actually very simple: ex CEO and (still) current CFO are shisters. Too clever by half, they thought they could get away with it.

Sorry to say, but ex CEO will have to be removed from the board, and the CFO just has to go. Fast!

There are no other survival options
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