Enablence lines up financing, second joint venture in China

Enablence Technologies Inc. (TSX VENTURE:ENA), which is working to get back on its feet after reaching the brink of insolvency, has announced it will help create a second joint venture in China. It also says it has lined up additional funding and may have found an in-house buyer for its photodiode business.

The existing Chinese joint venture, Enablence Sunblence Technologies Co., Ltd., is a partnership with SUNSEA Telecommunications Co. Ltd. (see "Enablence, SUNSEA joint venture targets Chinese broadband component market"). The new joint venture, dubbed “JV2” for the time being, will focus on 40- and 100-Gbps modules. The venture will have three partners, including Enablence. The company declined to identify the other partners, other than to say that the majority partner is a private Chinese company with revenues of more than $100 million that supplies technology to China’s major carriers.

JV2 will make the modules, which will leverage transmit optical subassembly/receive optical subassembly (TOSA/ROSA) parts from Enablence. The company described the TOSA/ROSAs as based on both planar lightwave circuit (PLC) and photonic integrated circuit (PIC) technology. Perhaps not coincidentally, Sunblence is working on developing just such devices as well.

Meanwhile, Enablence management says they have managed to line up new funding, in the form of two non-brokered private placement financings totaling $6 million. The funding, which is still subject to regulatory approvals, will come in tranches. The first, for about $3,329,000, will be exercised “by certain existing shareholders.” The second, for the rest of the approximately $2.57 million, will be completed by the majority JV2 partner and certain existing shareholders. The new financing will see all the investors involved purchasing shares at the same average price and on the same terms and conditions.

The initial financing will be completed by the same investors at two different prices: $750,000 at a price of $0.005 for an issuance of 150,000,000 common shares of Enablence, using the TSX Venture Exchange Policy on Temporary Relief from Certain Pricing Requirements, and approximately $2,579,000 at a price of $0.05 for an issuance of 51,577,960 common shares of Enablence. The shares are subject to a four-month hold period. This first tranche is expected to close on or before October 26, 2012.

The second tranche is expected to be completed on or before December 31, 2012.

Next, Enablence revealed that it has received an unsolicited offer from the management of its Zurich-based photodiode business to buy the subsidiary (see "Enablence Technologies to acquire Albis Optoelectronics"), which Enablence has been seeking to divest. Subject to the approval of the TSXV, the company plans to negotiate a share purchase agreement with its soon-to-be former employees with an eye toward completing the transaction no later than November 15, 2012.

Finally, Enablence has executed a term sheet with Cathay Bank of California bank to establish a new line of credit and extra bank facilities to primarily offset the repayment of the $3 million bridge loan from the same bank announced in July 2012. The company also has negotiated revised terms with the holders of the majority of the value of certain secured notes payable totaling US$11 million. The agreement includes partial repayment of the notes and an extension of the term for the payment of the balance of the principal and interest.

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