The news initially sent BearingPoint shares down 35% to $5.48 in after-hours trading, but a conference call with CEO Harry You seemed to calm investors, and shares scooted back up to $7.20, off 15%, in later trading last evening.
In an 8-K filing with the SEC, BearingPoint said a New York State Supreme Court last week ruled it was in default of its 2.75% Series B converted subordinated debentures due 2024, due to the company’s failure to file the proper SEC reports with the bond trustees. The amount of damages to be awarded to the bondholders is to be determined at a future trial date, and the Series B debentures won’t be accelerated, the company said.
You said BearingPoint would appeal the decision and is in talk with all of its other debt holders to secure waivers and extensions regarding the decision. On a call with analysts, he said he had already received strong verbal support from its Series C and D holders, and that any transfer of wealth from one group of debt holders to another would be improper.
The ruling, however, will delay BearingPoint’s 10-K annual report, which You said was ready to be filed this Friday, to a later date. But the company has announced some preliminary results from last year, including gross revenue up 1% to $3.4bn, and projections of a yearly loss of between $650m and $720m. Several large one-time charges, including an $82m expense from non-cash employee compensation and an $96m operating loss on its big systems contract with Hawaiian Telecommunication Inc, contributed to the loss for the year.
The company also announced some preliminary results from Q2 2006, including $811m in bookings. Voluntary attrition remained a sore spot for BearingPoint, up to 29% from 24%, and You stressed several internal initiatives underway to improve retention.
On account of the debenture ruling, the company said its 2006 cash flow and operating income would come in below guidance. It expects to be caught up with all of its SEC filings by late spring of 2007 at the earliest.
