Arise credit deal no cure for cash woes - analyst
Fri Jun 12, 2009 3:36pm EDT Email | Print | Share| Reprints | Single Page[-] Text [+]
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... OTTAWA, June 12 (Reuters) - A three-month extension on Arise Technologies Corp's (APV.TO) credit facility is only a Band-Aid on the the company's cash problems, not a cure, an analyst said on Friday.
The Canadian solar equipment maker said late on Thursday that its 7 million euro credit line with Commerzbank AG [COMM.UL], which expired on May 31, had been extended until Aug. 31. The interest rate was increased to 3.25 percent plus the overnight reference rate for the euro, from a rate of 2.5 percent.
"This is a temporary fix, which buys Arise a bit of time, but doesn't change the necessary remedy: the company needs a capital infusion now," said Canaccord Adams analyst Sara Elford in a note. "It is not clear to us that additional capital will be available."
Arise sells solar power systems along with the silicon and photovoltaic cells it produces. The solar sector has been hard hit by a dearth of funding for projects and by a flood of solar panels into the market, which pushed down prices and hurt profit.
Elford, who rates the company's stock a "sell" and has the target price under review, said that Arise has C$12.7 million drawn on another credit facility intended for the purchase of silicon wafers. That is scheduled for repayment on June 15 and the term has not yet been extended.
"In our view, Arises's balance sheet risk is very serious and not reflected in the current share price," the analyst wrote.
Arise said that as of March 31, it had loans and debt of C$53.5 million, up from C$17.5 million at the same time in 2008. Its cash had dropped to C$7.2 million from C$15.4 million.
The Waterloo, Ontario-based company also said it had negative working capital of C$11.1 million, with assets of C$52.7 million, less liabilities of C$63.8 million.
Arise said it was discussing options to obtain additional capital, such as partnerships, but had adequate funds to finance operations "into the latter part of 2009."
It did not forecast financial or operation expectations for 2009, citing economic, demand and pricing uncertainty.
Arise shares fell 5.4 percent, or 2.5 Canadian cents, to 43.5 Canadian cents on the Toronto Stock Exchange on Friday. That is a drop of more than 85 percent from early 2007, when the stock peaked at C$3.30.
($1=$1.12 Canadian) (Reporting by Susan Taylor; editing by Rob Wilson)
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