SAN FRANCISCO (05/25/2000) - Troubled Canadian applications vendor and Linux distributor Corel Corp. received both good and bad news late today. The company announced some much-needed extra financing, but also the resignations of two senior executives.
Trading in Corel shares was halted at the company's request earlier today signalling the likelihood of news related to the software vendor's shaky finances.
Alarm bells had rung regarding Corel's financial standing when, in a filing last month with the U.S. Securities and Exchange Commission (SEC), the company said it could run out of cash in 90 days if its planned merger with U.S. development tools vendor Inprise/Borland Corp. didn't proceed. [See "Corel May Run Out of Cash if Inprise Merger Falls," April 21.]However, earlier this month, Corel announced that it wouldn't be going ahead after all with its plan to acquire Inprise/Borland, another company with a troubled financial history. The pair had hoped to focus the combined entity on the lucrative market for the Linux open-source operating system. But then Corel's falling share price over the last few months ultimately led to both parties agreeing to terminate the deal. [See "Corel, Borland Terminate Merger Pact," May 16.]Corel today said it has struck a C$15 million (US$9.98 million) 'bought deal' agreement with Canaccord Capital Corp., according to a company statement issued late today. 'Bought deal' is a term used in securities underwriting implying a firm commitment to buy an entire issue of shares outright from the issuing company.
The agreement between Corel and Canaccord also includes the possibility of Canaccord extending the arrangement to reach a total value of C$30 million. The cash injection agreement is subject to regulatory and stock exchange approvals.
Should the arrangement go ahead, Corel intends to use the money raised to put in place a cost-savings plan and expects to announce details of such a move in the near future. The vendor hopes to achieve cost savings of around US$40 million on an annualized basis, according to Corel Chief Executive Officer and President Michael Cowpland.
"Having secured this source of financing, we can now turn our full attention towards executing our short and long-term strategy, which will include an aggressive cost-savings plan," Cowpland said in today's company statement.
Corel also announced today the resignations of Eric Smith, vice president, general counsel and corporate secretary and Sandra Gibson, executive vice president, corporate services.
The Canadian vendor is currently in a quiet period leading up to the release of the company's second-quarter financial results for fiscal 2000 due to appear during the week of June 19. Despite that situation, Corel went out of its way to explain in today's statement that the executive departures were not due to issues relating to either the company's finances or performance.
Smith's resignation is effective June 16, while Gibson will leave Corel at the end of next month.
The vendor's share price was up 2.5 percent today to close at US$3.84.
Corel, in Ottawa, Canada can be reached at +1-613-728-8200, or via the Web at http://www.corel.com/.