Renaissance settles business sale, breaches banking covenant
Renaissance Corporation said it has settled the sale of its distribution business to Exeed but has breached a banking covenant because some of the sale proceeds have been withheld.
The company said it received $4.33 million and a further $840,000 has been put in a solicitor's trust account pending the final value of inventory, claimed warranty breaches which Renaissance "absolutely" refutes, accrued leave payable to Renaissance staff who have transferred to Exeed and the provision of certain business records.
"Some items of fixed assets were also not sold to Exeed as they were located off-site and were not able to be verified by Exeed at settlement," said chairman Colin Giffney.
"Renaissance is comfortable with its legal position and expects that the above matters will be resolved to its satisfaction," Giffney said.
Renaissance has also made arrangements with Apple for on-going supply of Apple products to Renaissance's Yoobee retail outlets, he said.
Because of the withheld funds and the company having paid all it owed Apple, "Renaissance has breached its banking covenant for debtors coverage," Giffney said.
The covenant requires Renaissance to limit its "debtors" part of its balance sheet to no more than 100 percent of bank loans.
"Immediately following the sale, the debtors to loans ratio was 107 percent but this should right itself later this week and next as debtors due on the 20th of the month flow. Renaissance continues to have the support of its bankers," he said.
Renaissance shares closed yesterday at 15 cents, valuing the company at $6.76 million. The shares have been trending lower since early 2006 when they were $1.60. Later that year it lost its exclusive right to represent Apple in New Zealand.
The downward pattern was interrupted during 2010 when the shares peaked at 39 cents in November that year. They fell as low as 6.2 cents in December last year.
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