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Spansion files for bankruptcy

Posted: 03 Mar 2009 ?? ?Print Version ?Bookmark and Share

Keywords:Spansion bankruptcy? NOR flash? layoff?

NOR flash supplier Spansion Inc. has filed for bankruptcy amid growing anger among former employees at the company.

In a release issued on March 1, Spansion said it will continue to pursue strategic alternatives, including the sale of the firm. But for now, and as expected, it has filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

Each of Spansion's domestic subsidiaries also simultaneously filed Chapter 11 petitions. Spansion, Spansion LLC, Spansion Technology LLC, Spansion International Inc. and Cerium Laboratories LLC filed their voluntary petitions for relief under chapter 11 in the U.S. Bankruptcy Court for the District of Delaware. The Chapter 11 filings by Spansion and its domestic subsidiaries are events of default under Spansion's debt instruments.

As announced Feb. 9, Spansion's Japanese subsidiary, Spansion Japan Ltd, voluntarily entered into a proceeding under the "Corporate Reorganization Law" of Japan to obtain protection from its creditors as part of the company's restructuring efforts.

None of Spansion's subsidiaries in countries other than the United States and Japan are included in the U.S. or Japan filings.

The decision to seek Chapter 11 protection was made in consultation with an ad hoc consortium of holders of Spansion's $625 million Senior Secured Floating Rate Notes due 2013.

Spansion continues to be engaged in discussions with this ad hoc consortium for the development of a plan of reorganization. It would permit Spansion to emerge from chapter 11 in a stronger financial and competitive position and for the continued exploration of multiple proposals from multiple parties seeking a strategic transaction.

The company believes that its current and anticipated cash resources will be sufficient to pay its expenses and maintain its business operations while it explores and implements options to address its long-term cash needs.

"Given our focus on Spansion's future, management and the board have concluded that Chapter 11 provides the most effective means for Spansion to preserve its business, meet its post-petition obligations and maintain customer confidence and continuity while we complete this restructuring," said president and CEO John Kispert, in a statement. "At the same time we will continue to explore opportunities for a strategic transaction to ensure that we are doing all we can to maximize value for our stakeholders."

What happened?
Spansion has seen its share of upsand mostly downs. In 2005, Advanced Micro Devices Inc. and Fujitsu Ltd spun-off their NOR product groups into a new and independent operation called Spansion.

But since the spin-off, it's been an uphill battle for loss-ridden Spansion. In 2005, the company filed for an IPO amid a capacity glut and falling product prices.

Amid a string of losses, declining funds and a major downturn, Spansion earlier this year implemented another round of cost-cutting measures. As early as January, rumors were running rampant that Spansion is mulling a plan to file Chapter 11 protection.

At one time, there were other rumors about Spansion, including a report that Japan's Toshiba Corp. would acquire the company. Micron Technology Inc. is also reportedly looking at Spansion.

In January, the company confirmed that it has been exploring strategic alternatives, "including, but not limited to, opportunities to merge with or sell to similar U.S. or foreign businesses."

Also in January, Taiwanese IC-packaging and test house ChipMOS Technologies Ltd delivered a notice of breach and notice of intent to terminate a service agreement with Spansion. Spansion currently has an outstanding account receivable with ChipMOS of approximately $57 million of which approximately $18 million is in default, according to the IC-packaging house. ChipMOS provides IC-packaging and test services for Spansion.

Last month, Bertrand Cambou resigned as Spansion president and CEO amid losses and other problems. The company then named Kispert, former president and COO of KLA-Tencor Corp., as its new chief executive and member of the board.

Ex-workers' fury
Spansion's new president and CEO is entitled to a bonus of $1.75 millionif he can find a buyer or white knight for the troubled memory company, according to a recent filing. The company also delayed making the interest payments on its senior notes.

Last week, there were reports that the company would cut 3,000 jobs, or about 35 percent of its workforce, over time, industry sources said. Despite layoffs and losses, Spansion reinstated full pay for many of its executives.

This angered employees who were impacted by the layoffs. "Spansion's ex-employees are outraged on how the company handles layoff in the U.S. None of the U.S. employees got any advanced notices or severance or medical benefit extension," said one former employee.

"It seemed like all last week, there were rumors that each day would be the day that layoffs would happen but then nothing would happen. Then, on Thursday, we get word that an executive VP tried to save his own hide by offering up the skins of a lower VP and a director," said another ex-employee.

Regarding the layoff, "we got zero severance pay. Just vacation accrued and 35 percent of Cobra for 4 months," said the former worker. "Pretty crappy."

"My comments would have centered on the craziness of cutting everyone's salary 10 percent, just like they did at AMD, then laying off about one-third of the workforce," said another upset former employee.

"After that the execs pay was re-instated under the guise of a retention bonus. Why would you want to retain a bunch of people who ran the business that badly? And if you did want to retain them, you really don't need to pay them any kind of retention bonus because they are not going to find a job anywhere else in this economy," the source added.

- Mark LaPedus
EE Times





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