Ciber Gets Default Waived by Wells Fargo, Will Take Action Yielding $25M In Proceeds By End Of Year

Ciber received a waiver from Wells Fargo after seven months in default and agreed to complete a divestiture or restructuring generating at least $25 million in proceeds by the end of 2016.

"We've come from a rather difficult situation when we went into default at the end of Q1, and I think we've removed a lot of uncertainty," Ciber CFO Christian Metzger said during an earnings call Tuesday with Wall Street analysts. "It is important for our shareholders, our clients and our business partners that we are no longer in default."

The agreement with Wells Fargo, which was signed Oct. 27 and disclosed Nov. 2, requires Greenwood Village, Colo.-based Ciber -- No. 43 on the 2016 CRN Solution Provider 500 – to have signed a letter of intent by Nov. 1 to sell out, sell off, refinance or undertake another business combination by Dec. 31 that yields at least $25 million in proceeds.

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Metzger acknowledged during the call that the Nov. 1 letter of intent deadline has passed but said Ciber is still in compliance in its agreement with Wells Fargo. As part of the deal, Ciber agreed to use Faunus Group International (FGI) for its European borrowing going forward, limiting Wells Fargo's exposure to just North America, Metzger said.

"We worked with our banking partners throughout the quarter to provide a new facility based on our international receivables, and we are no longer in default with our North American lender," Metzger said.

The Wells Fargo agreement also required that Ciber engage and retain a strategic adviser to prepare a confidential information memorandum, and the company disclosed Tuesday that global investment bank Houlihan Lokey has been retained for that purpose. Ciber's board has established an M&A committee, said CEO Michael Boustridge, and wants to ensure that it's competitive in all markets.

"We need to become a much simpler, a much more lean and focused company," Boustridge told financial analysts Tuesday. "We must be competitive. And those [situations] that aren't, we are looking to divest."

Ciber unloaded three of its European business units this summer, yielding $32 million in proceeds from the first two sales (the selling price for the third transaction wasn't disclosed). The company's German business – which accounts for nearly half of Ciber's international revenue – has suffered from high levels of attrition, forcing Ciber to hire subcontractors to fulfill its contractual duties in the country.

"We're continuing to face challenging conditions in many of our key businesses, [and] we're spending considerable time and effort to improve bookings and reduce our cost structure," Metzger said.

Ciber saw sales in the quarter ended Sept. 30 plummet to $144.3 million, down 25.1 percent from $192.6 million the year prior. That fell short of Seeking Alpha projections of $152.8 million.

The loss from continuing operations was $18.8 million, or a loss of 23 cents per share, compared with a loss of $356,000 in the third quarter of 2015.

Adjusting for restructuring and amortization costs, Ciber's loss was $19.2 million, or a loss of 23 cents per share, down from an adjusted net income of $900,000, or 1 cent per share. Seeking Alpha had projected a loss of 9 cents per share.

Wall Street reacted very unfavorably to the results, sending Ciber's stock down 12.9 percent in trading Tuesday morning to 70 cents per share. That's the lowest price at which Ciber's stock has traded since the company went public in March 1994. Ciber's stock price has dropped by 80.1 percent so far this year.

Sales in Ciber's North American business tumbled to $97.6 million, down 11 percent from $110 million the year prior. Ciber's international revenue fell to $46.7 million, down 44 percent from $82.8 million the year prior.

Excluding revenue from Norway and the Netherlands – the business units were sold to ManpowerGroup in June and August for $25 million and $7 million, respectively – Ciber's overall sales fell by 14 percent on a year-over-year basis, and its international sales declined by 20 percent from last year.