History (1989): Rodime’s Laborious Recovery Plan

At the same time it announced dramatic results of its third quarter, Rodime unveiled the new actions it was taking to try to straighten out the company’s situation.

A financial plan was set up to assure the availability of about $27 million fresh each, thus keeping the support of the Bank of Scotland.

In addition, all volume production will now be completed in Singapore, where the company employs 400 people, rather than in Boca Raton (FL) actually with 165 employees.

After the transfer of the management functions from Scotland to the US, an opposite movement is likely to occur from Boca Raton to Glenrothes (300 employees) in Scotland where the company is mostly supported by British depositors easier to convince than the American investors who already burned their fingers over the hazardous HDD industry.

Concerning the technical point of view, Rodime expects to rely on its undeniable know-how in HDD technology to take advantage of a market that tends to produce more and more 3.5-inch drives with growing capacities. You even hear about 400MB and even more.

The new decisions, detailed further on, show that Rodime’s new management with Thomas Kamp, chairman and Peter Bailey, MD is handling the situation.

But nothing’s won yet. In its second quarter ended March 31 1989, the company reported sales of $21.13 million to be compared with $25.432 million in 1988’s same period.

According to the company, “the drop in sales in this quarter is mostly due to the fact that the production was delayed by the shortage of some major components that weren’t available in large quantities. This type of difficulty was already frequent concerning disk drives, but extra problems occurred as some suppliers postponed their deliveries wanting guaranties of payment. The sales also endured a decreasing peripheral memory market that made sales prices drop. The cost per unit remained higher than the sales price, mostly on account of competition, but also on account of prices of component suppliers increasing and the slowing down productivity that resulted. To solve these problems and to help the company face future demands, a reorganization plan has been adopted.“

Here are the main lines of the program officially announced by Kamp and Bailey: “The directors of Rodime announced a strategic recovery and recapitalisation plan. The company will raise a $13.3 million by the issue of 133,997,400 new ordinary shares of 7p per share by way of a 17 for 1 rights issue. In addition it is proposed to issue $0.47 million of deferred ordinary shares to executive directors and to issue $4.52 million of 9% cumulative redeemable preference shares. Irrevocable undertakings have been obtained from Bank of Scotland and another UK investor to subscribe for 31,772,049 new ordinary shares or 23.71% of new ordinary shares to be allotted pursuant to the rights issue. To the extent that the new ordinary shares are not taken up in full by the existing shareholders, the underwriters have agreed to subscribe for all remaining new shares. This issue is fully underwritten by Bank of Scotland, 3I plc and other UK investors. The new shares are not being registered under US Securities Act of 1933 and therefore, the rights are not being offered to US shareholders. Arrangements have been made for a pro rate amount of the rights to subscribe for new shares to be sold in the market and cash proceeds if any (after deduction of expenses of sale) to be distributed to US shareholders. In addition, Bank of Scotland has agreed to make available a $20 million revolving credit facility, a $10 million medium-term loan facility for working capital requirements and a $6 million subordinated secured loan. The executive directors will also be granted options over shares which, subject to the achievement of certain increased share values, will entitle them to subscribe for approximately 9% of the then issued ordinary share capital of the company by September 30, 1992. The company has also initiated an operational restructuring programme to consolidate certain of its manufacturing operations and administrative functions and to transfer the majority of high volume manufacturing to its new facility in Singapore. In connection with this, the company provided a $11.966 million reserve for restructuring during the quarter. This restructuring programme is designed to generate savings in manufacturing and administrative costs in the financial year ending September 30, 1990.”

This article is an abstract of news published on the former paper version of Computer Data Storage Newsletter on issue ≠18, published on July 1989.