A Waterloo, Ont.-based tech company is fighting for its life and that fight has now made its way to courtrooms in both Canada and the U.S.
Sandvine, once considered a tech darling, began bleeding money over its alleged deals with authoritarian regimes around the world and its inclusion on the U.S. Department of Commerce’s Entity List. Even though the company has now been removed from that list, it’s still working to heal those financial wounds.
“It was inevitable the second they were blacklisted by the United States that it was going to have a major impact on their bottom line,” Ritesh Kotak, a cybersecurity tech analyst, told CTV News.
There is also concern that bottom line could bottom out.
The company has asked for urgent help to protect its assets from creditors amid an attempted restructuring.
Court documents show the countries Sandvine has exited, and countries they are in the process of exiting, represent about 45 per cent of its 2023 revenue.
“The message here from the U.S. government is: ‘If you are going to be developing tools that could be weaponized against populations, and there are no checks and balances in place, guess what? We’re going to put you on this blacklist and that is going to completely decimate your business,’” Kotak explained.
Representatives for the company appeared in court on a couple of occasions throughout November in an attempt to protect its assets from creditors and restructuring, in order to avoid a bankruptcy.
An Ontario Superior Court justice granted a Sale and Investment Solicitation Process (SISP) order on Nov. 15, which allowed the company to look at opportunities for a refinancing, sale or investment.
“The SISP is warranted and necessary at this time. The applicants are insolvent and dependent on the financing provided by the consenting stakeholders pursuant to the RSA,” the document said, referring to the SISP Approval Order granted by the Ontario Superior Court.
The submission deadline for letters of intent has been set for Dec. 18, 2024.
“I am satisfied that the timelines set out in the SISP, while tight, are sufficient to balance the need to adequately canvass the market while simultaneously protecting against the risk of market decline,” Justice Osborne wrote in the Nov. 15 court documents.
The decision comes as a U.S. bankruptcy court in Texas, where Sandvine also filed for bankruptcy protection earlier this month, agreed to shield the company from potential lawsuits by creditors during the restructuring process.
“Them going under doesn’t help anyone, doesn’t help their employees, doesn’t help the creditors,” said Kotak. “This is a company that still will have millions of dollars in revenue. There is going to be a financial hit, but they will most likely be able to restructure and bounce back.”
It may not be easy, but it is possible.
“There have been companies and, especially in the cybersecurity space, we see this with the parent company of software such as Pegasus, which was accused of providing their software to certain regimes as well. But governments are still using it,” Kotak explained.
Justice Osborne is also allowing Sandvine “to draw on the DIP Facility up to a maximum principal amount of USD $30 million,” according o court documents, which essentially allows them to borrow money in order to fund Companies’ Creditors Arrangement Act (CCAA) proceedings and maintain minimum liquidity.
As Sandvine restructures, they have the right to downsize or shut down, terminate employees or temporarily lay them off, but the company does not expect additional layoffs above and beyond the ones that have already taken place.
“We entered the CCAA proceedings with financing commitments and a pre-arranged restructuring transaction with our current stakeholders,” a statement from Anne Hart, a spokesperson for Sandvine, read in part. “That restructuring is subject to higher and better offers, but we already know we have a viable plan, subject to court approval.”
Although the odds may be stacked against them, Sandvine maintains they are not giving up and are instead offering a new look for the future.
— With reporting from Bloomberg
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