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Finisar readies bailiffs as QPC defaults

A nasty Hallowe'en for QPC Lasers, as SEC filings reveal that Finisar, owed $5.4 million, will seek possession of QPC's assets on November 7. * Updated November 3 *

Fiber-optic component maker Finisar is set to remove assets belonging to QPC Lasers on November 7, after QPC failed to pay Finisar interest due on a loan note.

According to QPC s own filings with the US Securities and Exchange Commission (SEC), it failed to make an interest payment of around $44,000 that was due on October 18.

The interest relates to a "secured promissory note", or loan, of $6 million that Finisar first agreed with QPC in September 2006 and extended on August 20, 2008.

Semiconductor laser maker QPC, financed by an increasingly complex combination of loans in recent years, had been attempting to raise more funding since April of this year amid the unfolding credit crunch (see related story).

But its inability to do so has resulted in an array of interest repayments that cannot now be met.

Finisar wrote to QPC on October 21, stating that it would "immediately exercise all of its remedies", as described in the loan agreement.

A further letter sent yesterday (October 30) by Finisar's legal counsel made clear that those remedies would include repossession of some key assets.

According to QPC s own documentation, that second letter demanded "that [QPC] assemble all the collateral securing [QPC s] obligations under the Finisar note at its Sylmar, California address by 9am on November 7, 2008, and permit Finisar to enter those premises to take possession and remove the collateral to a location of Finisar's choosing for later sale".

In short, Finisar is sending in the bailiffs to settle the outstanding loan amount - $5.4 million plus the unpaid interest - in full.

The "collateral" upon which the loan note is based includes not just the physical assets at QPC s MOCVD fab, it also includes the company's intellectual property.

More SEC filings revealed that Finisar is not the only party seeking to liquidate QPC assets.

Boston Financial and Equity Corporation, which signed a sale-and-leaseback agreement with QPC in February 2007, has decided to terminate that deal after QPC also defaulted on a lease payment.

Boston Financial is seeking repossession of the leased equipment and settlement of the remaining lease payments, which total $263,000.

In QPC s SEC filings, which are signed by CFO and co-founder George Lintz, the company is currently said to be considering its responses to the demands made by Finisar and Boston Financial.

* November 3 update *
In more filings to the SEC on November 3, QPC confirmed that it expected to enter bankruptcy protection within the next few days.

Despite dicussions with numerous potential investors, QPC said, the company was still suffering from "a severe liquidity crisis".

The nature of that bankruptcy filing could be under either the Chapter 11 code, which would involve an asset sale, or under Chapter 7 proceedings.

Either way, QPC shareholders are likely to end up with nothing, since any cash raised through an asset sale would be substantially less than the $5.4 million still owed to senior creditor Finisar.

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