Enablence turns to China for financing

Management at optical component and subsystem developer Enablence Technologies Inc. (TSX VENTURE:ENA) has taken another step toward getting the company back on its financial feet. The company has reached an agreement in principle with China TriComm Ltd. and certain shareholders of the company to raise up to CAN$15 million. The financing will be used as part of a strategy to reduce the company’s debt from approximately CAN$16 million to approximately CAN$3 million.

China TriComm Ltd. is an investment company under common ownership with Zhejiang Chuangyi Technologies, an integrated infrastructure equipment and solution provider for the cable industry in China.

The agreement with China TriComm calls for issuance of CAN$12 million worth of Enablence common shares as well as the delivery of a CAN$3 million convertible bridge loan. The equity transaction will see China TriComm Ltd. and one or more of its affiliates subscribe for 45 million common shares at an issue price of CAN$0.20, while certain shareholders of the company, which may include some insiders of Enablence, will subscribe for an additional 15 million common shares at the same price.

An affiliate of China Tricomm will provide the bridge loan for working capital purposes. Enablence has already received a first tranche of CAN$500,000. The second CAN$2.5 million tranche is expected to be received on July 22, 2013. The loan will automatically be converted to common shares of Enablence at $0.15 per share on the closing of the equity transaction.

The parties expect to enter into definitive agreements by August 15, 2013, with a closing date for the equity transaction of no later than August 31, 2013. The equity transaction is subject to several conditions.

Meanwhile, Enablence management say they have already reached an agreement in principle with the holders of substantially all of the secured subordinated promissory notes to eliminate the approximately US$11.6 million of principal and accrued interest. Those notes will be exchanged for total cash payments of up to US$3.5 million and the issuance of up to 20 million common shares of Enablence at $0.20 per share, subject to TSX Venture Exchange approval.

"The closing of this financing will be the culmination of a restructuring process that began 18 months ago." said Louis De Jong, CEO. "During that time Enablence has shed non-core assets, streamlined its ongoing business, expects to reduce total indebtedness from approximately $19,000,000 to approximately $3,000,000 and will have raised sufficient capital to continue to fund its rapidly growing 100-Gbps transceiver business. This transaction, when completed, will be a transformative event for Enablence which will stabilize the financial footing of Enablence's business and position Enablence to focus on its customers and future growth."

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