Vitesse Rejects Request for Early Debt Payment

Staff Reporter -- Electronic News, 8/22/2006

Troubled IC vendor Vitesse Semiconductor Corp. has received – and rejected – an accelerated attempt by a trustee to collect payment for $96.7 million in convertible subordinated debentures due in 2024.

The trustee for the 1.5 percent convertible notes has asserted that a default occurred when Vitesse failed to make its Securities and Exchange Commission (SEC) filings on time, putting it in danger of Nasdaq delisting, due to stock options-related hold ups. Vitesse has been mired in the industry-wide stock options backdating scandal since May, when it came under investigation from the SEC and fired its CEO, CFO and an executive VP amid backdating allegations.

Vitesse denied that it is in default with respect to the debentures, and turned down the attempt to obtain early payment.

Negotiations to resolve the dispute continue with a majority of the holders of the debentures, who have agreed to instruct the trustee to not take further action with respect to the debentures for a period of 14 days, the company said.

"We are disappointed by the decision of the debenture holders to attempt to accelerate the debt," Chris Gardner, Vitesse's CEO, said in a statement. "Vitesse made a good faith offer to resolve this dispute. Unfortunately, the demands by some of the holders of the debentures have far exceeded anything that we would consider reasonable under the circumstances.

"We continue to negotiate in good faith for a resolution to this issue. But as we have said, we will not accept a negotiated settlement if we feel it unfair to Vitesse or to our shareholders," Gardner concluded.