Trident Microsystems, the set-top-box and television semiconductor solutions specialist, has filed for Chapter 11 bankruptcy protection after more than a year of restructuring that has failed to turn its fortunes around.
As part of its filing, the…
Trident Microsystems, the set-top-box and television semiconductor solutions specialist, has filed for Chapter 11 bankruptcy protection after more than a year of restructuring that has failed to turn its fortunes around.
As part of its filing, the company has signed an asset purchase agreement with fabless semiconductor developer Entropic Communications whereby the latter will act as a ‘stalking horse’ bidder for Trident’s set-top-box (STB) business.
Subject to bankruptcy court approval, Entropic will pay US$55m in cash plus the assumption of specified liabilities for Trident’s STB assets. The sale is expected to close in late February 2012.
Trident added that is has ‘ample liquidity’ to continue to operate all of its business lines until the court approves the sale and that it continues to explore strategic alternatives for its remaining business units.
The company has hired FTI Consulting as its financial adviser and DLA Piper as its legal adviser during the bankruptcy reorganisation.
The first day hearing in the bankruptcy court for the district of Delaware took place on 5 January 2012 with judge Christopher Sontchi presiding. The time and date for the meeting of Trident’s creditors has yet to be determined.
Commenting on the filing, Dr Bami Bastani, who was only appointed Trident’s CEO in July 2011, said: “Trident, like many of its competitors, has been undergoing rapid changes which have hindered its ability to operate profitably. A combination of increased pricing pressures in our industry, lower demand in consumer electronics, and slower than anticipated new product adoption has contributed to increased operating losses, a deterioration in liquidity and an erosion in equity values for Trident.”
Further to this Trident stated in its Chapter 11 filing documents, “The deteriorated value of the outstanding common stock and the termination of the Bank of America line of credit have restricted Trident’s ability to raise money through traditional means. The combination of lower margins and sale volumes, high employee costs and limited access to new capital has significantly affected Trident’s liquidity and ability to pay its debts as they become due.”
Over the past year Trident has undertaken a series of cost cutting measures in order to address this downturn. It has sought to shed around 20% of its workforce by year-end, secured the sale and leaseback of its Shanghai operations and agreed to a number of patent sales and licence agreements. However, none of these brought about the necessary change in fortune and Trident revealed in its third quarter 2011 results at the beginning of November that net losses had grown on a both a year-on-year and quarter-on-quarter basis.
Founded in 1987, Trident originally produced computer graphics chipsets but shifted its focus into semiconductors for the home entertainment market in the early 2000s. In early 2010, Trident sought to gain scale in this area by purchasing the television and STB business of NXP Semiconductors. EchoStar, DirecTV and Pace are among its STB customers.
