Ethernet equipment

Riverstone's Bankruptcy Begins

Investors starving for a detailed peek at Riverstone Networks Inc. (OTC: RSTN.PK) financials are being thrown a few crumbs, as the company has filed its petition for Chapter 11 bankruptcy protection, unveiling some balance-sheet details in the process.

Filed on Feb. 7 in Delaware, the petition is part of a plan, announced that same day, for Lucent Technologies Inc. (NYSE: LU) to acquire the company. Once Riverstone has settled with its creditors, the company's assets will be auctioned off, with Lucent already putting in a $170 million bid. (See Riverstone Posts Info and Lucent Gets Riverstoned.)

Most analysts consider the price high -- Riverstone's market capitalization is around $138 million -- so it doesn't appear likely that Lucent's bid will be thwarted. After the asset sale, Riverstone plans to distribute cash to shareholders.

All this could take a while -- Riverstone's Website notes that the hearing on the asset sale is set for March 23. Riverstone's plan of liquidation would be filed in April.

Stuck on a treadmill of earnings restatements, Riverstone hasn't filed an up-to-date quarterly report in more than two years. (See Riverstone Misses SEC Deadlines.) The Chapter 11 filing offers a glimpse of the books, though. It lists Riverstone's assets at $98,341,134 -- not including long-term investments, property, and goodwill -- and its liabilities at $130,071,947.

Nearly all of Lucent's debt is owed to U.S. Bank, which holds $65.9 million in notes that Riverstone issued in 2001; those notes were coming due late this year. (See Riverstone Offers Notes.)

Ixia (Nasdaq: XXIA) is owed roughly $136,000 and HP Inc. (NYSE: HPQ) roughly $53,000, according to the bankruptcy filing.

Things ramp down steeply from there, as no other creditor is owed more than $20,000. In fact, the 20th largest creditor, according to the filing, is Le Boulanger, claiming an unpaid bill of $152.23. Unpaid sandwiches aren't exactly scandal material. (See Strip-Club Scandal CEO Quits.)

The creditor list has no big surprises, but there's one amusing entry: Light Reading makes the list, with a claim of $3,200.

The recent Light Reading poll on the acquisition shows 61 percent of readers (441 respondents) saying Lucent is doing the right thing. And 38 percent say they're sad to see Riverstone go.

As for the real winner in all this, 36 percent said Lucent, and another 28 percent voted for Riverstone's shareholders. But 21 percent think the winner is "someone else." To those who voted that way: Feel free to use this story's message board to enlighten us.

— Craig Matsumoto, Senior Editor, Light Reading

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Pete Baldwin 12/5/2012 | 4:06:11 AM
re: Riverstone's Bankruptcy Begins So ... any reaction to the numbers? Is Riverstone in better or worse shape than you expected?
paolo.franzoi 12/5/2012 | 4:06:10 AM
re: Riverstone's Bankruptcy Begins
You can't sell employees. But generally during an asset sale there is some general agreement about hiring current employees. So, there would need to be offer letters generated to current Riverstone employees.

However, as with most deals there will be some "synergies". Minimally one would expect HQ functions to be slimmed down dramatically if not eliminated. Things like HR, Legal, Finance, etc.

tunnelend 12/5/2012 | 4:06:10 AM
re: Riverstone's Bankruptcy Begins Are the employees being sold as part of the asset too?
What happens to them - will they be laid off otherwise?
chip_mate 12/5/2012 | 4:06:09 AM
re: Riverstone's Bankruptcy Begins "Are the employees being sold as part of the asset too?
What happens to them - will they be laid off otherwise?"

Never been through one of these, I'm assuming.
He-He.....the fun begins.
Little fishies have been thrown into the shark tank.
The smoothest ones will survive through rump kissing (start with xxXXname_removed_to_avoid_LR_from_being_sued_and_dropping_a_dime_on_chip-mateXXxx, but make sure his boss is aware of you as well), and obstacle avoidance (anyone below old ger' will see you as invasive and a threat to them).
The rest will find themselves as chum for the lucent folk to feast on.

Now this isn't to say this is a singular phenom to lucy, rather it's pretty standard practice among the dino-vendor crowd.
futureisbright 12/5/2012 | 4:06:05 AM
re: Riverstone's Bankruptcy Begins So, how much is management making out of this sorry little exercise?
Johncop 12/5/2012 | 4:06:05 AM
re: Riverstone's Bankruptcy Begins how come no one mentions the almost $50m in listed liabilities on the BS that are accruals that will never be, and will be reversed. There's a 2.6m accrual for audit expense that wont be used, 17m in accrued deferred revenue, and another 27.6m accrued for 2 D & O policies. Now that the SEC is gone, this wont be used either, granted that may have to give some of it back, but more than half is in full release.
fiberous 12/5/2012 | 4:06:04 AM
re: Riverstone's Bankruptcy Begins A lot! Shantanu Baby is cooing in pleasure after
nearly 8 years of confuscian pain.
fiberous 12/5/2012 | 4:06:04 AM
re: Riverstone's Bankruptcy Begins John, you know what that is for LUcy will use
that to offset her income with "goodwill" losses
Thought this was the way one milks uncle SAM
these days.
Imagine getting a tax break when you buy
Johncop 12/5/2012 | 4:06:03 AM
re: Riverstone's Bankruptcy Begins is there anyone willing to analyze the BS and give another view as to what the net could be? I know there is a lot of grey, but 98 asset to 130 liabilities that is getting quoted all over the place just doesnt seem correct. Why would they have to spend the 2.6m in accrued audit expense? ALso, there is a bunch of deferred revenue there too. Thoughts would be appreciated
paolo.franzoi 12/5/2012 | 4:06:03 AM
re: Riverstone's Bankruptcy Begins
Accrued expenses are estimations of what costs will be based upon payment of a contract at completion (and similar costs). For example, Riverstone will have outside audit expenses at least once a quarter, but may only pay these expenses at the end of the year. The $2.6M should be for costs already assumed (like auditing at the end of the year), but not yet paid for.

The $98M versus $130M are Riverstone's own numbers. That is why they are being tossed around.

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