Ixia fails to file financials, triggers default under 3% convertibles

By Marisa Wong

Madison, Wis., May 6 - Ixia is in default under the indenture governing its $200 million 3% convertible senior notes due Dec. 15, 2015, according to an 8-K filing with the Securities and Exchange Commission.

Under the indenture, the company is required to file with the trustee, Wells Fargo Bank, NA, information, documents or reports within 15 days after they are required to be filed with the SEC.

Ixia is in default of its obligation to file with the trustee within 15 days after their prescribed due dates the reports and an 8-K/A filing that amend an 8-K filed Dec. 6 in connection with the company's acquisition of Net Optics, Inc. on Dec. 5. The 8-K/A filing will include historical financial statements of Net Optics and pro forma financial information for Ixia and Net Optics.

Wells Fargo gave notice of the default on May 1.

If the company does not file the reports and the 8-K/A with the trustee within 60 days after May 1 (on or before June 30) and unless a waiver is obtained from holders of more than 50% in principal amount of the notes, an event of default will occur.

If an event of default does occur, the company intends to pay noteholders additional interest at an annual rate of 0.5% for the first 180 days.

If the event of default is not cured within 180 days or the company chooses not to make the additional interest payment, the trustee or the holders of at least 25% in principal amount of the notes may declare the principal amount of the notes to be due and payable immediately.

Potential delisting

On Tuesday Ixia announced it received a letter from Nasdaq's Listing Qualifications Department concerning the potential delisting of the company's common stock.

The potential delisting is due to Ixia's delay in filing a 10-Q for the quarter ended Sept. 30, 2013 and 10-K for the year ended Dec. 31.

The company plans to request a hearing, which will automatically stay the delisting of the company's stock through May 24.

Under the 3% convertibles indenture, if the company's common stock ceases to be listed on Nasdaq, then noteholders can require the company to repurchase their notes on a day 20 to 45 business days after the delisting event.

Credit agreement

According to the 8-K filing, events of default could also occur under Ixia's credit agreement dated Dec. 21, 2012 with Bank of America, NA as administrative agent, swingline lender and letter-of-credit issuer.

Events of default would occur if an event of default, or acceleration due to delisting, occurs under the indenture governing the 3% convertibles or, absent continuing waivers, the company fails to deliver to the administrative agent its audited financial statements for the fiscal year ended Dec. 31.

If any of these events of default occur under the credit agreement, the company would be blocked from borrowing and obtaining letters of credit. The administrative agent would also have the right, with the consent of a majority of the lenders, to terminate the credit agreement and accelerate any outstanding amounts.

As of the Tuesday, no amounts are outstanding under the credit facility.

Calabasas, Calif.-based Ixia provides test and monitoring services that enable its customers to optimize networks and data centers to accelerate, secure and scale application delivery.

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