Bookham boosts cashflow with aircraft leases
InP chip and fiber-optic module manufacturer Bookham has improved its cashflow situation through a tax break that frees up nearly $12 million.
The company, which recently acknowledged that it would need to generate some extra cash through asset sales and a possible share issue, received £4.2 million ($7.5 million) on August 10 under the terms of the deal.
On top of that initial cash, Bookham stands to receive a further £1 million on October 14, another £1 million on July 14, 2006, and £0.43 million on July 16, 2007.
The somewhat convoluted deal involves Deutsche Bank, a subsidiary of the German financier called London Industrial Leasing, and a company known as Creekside that deals in aircraft sub-leases.
Bookham has agreed to purchase all issued share capital of Creekside, which will now operate as its subsidiary. As a result, Bookham stands to receive payments due for the aircraft that it leases.
Critically, Creekside is based in the UK, meaning that Bookham can transfer tax losses to its advantage.
"Bookham expects to surrender certain of its tax losses against any UK taxable income that may arise as a result of [Creekside s income], to reduce any UK taxes that would otherwise be due from Creekside," explained the company in its Form 8-K filing with the Securities and Exchange Commission.
The net result means that Bookham will have up to an extra £6.63 million available in cash. CEO Giorgio Anania described the agreement as one part of the company's overall financing plan, with Bookham also set to sell some of its assets and expected to raise money through a share issue (see related story).
Ernst and Young, Bookham's official accountant, outlined its revised opinion of the company's cash requirements in an amended 10-K/A form submitted to the Securities and Exchange Commission on August 15.
"If management are unable to raise additional finance it would significantly adversely affect the company's ability to continue operations," declared the auditor.
