SR Telecom Strapped for Cash

SR Telecom Inc. warned of losses in its fourth and first quarters yesterday, blaming delays in orders for its telecommunications equipment and lower production due to dwindling credit.
Investors sold the shares hard on the news, driving them down 31.5 per cent on the day. But a sizable retreat ahead of the news prompted a Canadian market watchdog to launch a probe.
Blaming unexpected delays in receiving purchase orders under existing contracts and the delay of some shipments into the first quarter, SR Telecom forecast fourth-quarter revenue between $22 million and $25 million.
That is down from third-quarter sales of $37.4 million and a sharp decline from year-earlier revenue of $41.6 million.
The company also said it will not break even in its core wireless business in the quarter, generating instead a "significant loss."
It also warned of a "significant" first-quarter loss on the basis of earnings before interest, tax, depreciation and amortization. SR Telecom said a reduction in available supplier credit crimped raw-material purchases, resulting in a production slowdown.
The stock sank 82 cents to close at $1.78 on the Toronto Stock Exchange in heavy volume The stock was halted at mid-morning in Toronto, but had already slid $2.18 from its opening level of $2.52 before the news was released. The shares also took sizable losses on Monday and Tuesday.
The price activity prompted Market Regulation Services, which polices trading on the Toronto Exchange, to launch a probe into the company.
"We'll be looking into the trading that went on, particularly over the last 48 hours, with the interests of seeing who did the trading and to make sure everything was above board," said Doug Maybe, Market Regulation Services spokesman.
The Montreal-based company said it had entered into a non-binding letter of intent from a major U.S. lender for a five-year revolving senior secured credit facility worth up to $50 million.
At the end of the fourth quarter, the company said it had about $6.9 million in cash, of which $1.9 million was restricted.