Allen Vanguard updates investors on expressions of interest in outside investment and financing requirements



    OTTAWA, Sept. 16 /CNW Telbec/ - Allen-Vanguard Corporation (TSX: VRS)
("Allen-Vanguard" or the "Company") of Ottawa, Canada updated investors today
on the status of its evaluation of expressions of interest for significant
investment in the Company by outside investors. As reported on August 14, 2008
in its financial results news release for the third quarter of fiscal 2008,
the Company had received several unsolicited expressions of interest in a
significant investment position in the Company and had engaged RBC Capital
Markets (the "Investment Bankers") to assist with an evaluation of proposals.
    At August 14 the Company had accepted a proposed non-binding term sheet
from one investor with terms based on advanced due diligence already
substantially completed by the investor, and with an intended closing date
before September 30, 2008. However, the final terms proposed by the investor
subsequent to August 14 differed materially from the initial proposal and the
board rejected it on the basis that it was not in the best interest of
Allen-Vanguard or its shareholders.
    Since then, the Company has asked its Investment Bankers to consider the
remaining unsolicited expressions of interest, and also to solicit interest
from other potential investors and explore alternative recapitalization
scenarios. The Company currently has long-term debt of approximately
$185 million under a $200 million term loan facility with a banking syndicate
led by the Royal Bank of Canada (the "lending syndicate"), under which it is
required to make quarterly principal payments of approximately $10 million and
meet certain financial covenants which are measured as at the end of each
quarter. The Company was in compliance with the terms of the facility for the
last reported period at June 30, 2008. The Company also has a revolving credit
facility of up to $50 million limited by a borrowing base (the "Revolver")
with the same lending syndicate. The borrowing base contains a number of
eligibility requirements including with respect to foreign receivables. At
present, it is drawn to a cash amount of only $8.0 million and an encumbrance
of $3.6 million on account of letters of credit. If the eligibility
requirements were changed, this Revolver would be sufficient for working
capital purposes.
    Discussions on various recapitalization alternatives are actively
underway in conjunction with advisory work by the Company's Investment Bankers
and other outside advisors. However, in contrast to the situation at August 14
when the closing of an outside investment appeared imminent, the extended
process currently underway means that it is now unlikely the Company will
conclude a transaction by September 30, 2008, at which time it is scheduled to
make its next $10 million quarterly payment and meet quarterly covenants.
Without an improvement in cash flow, an investment transaction or
accommodation from the Company's lending syndicate by September 30, the
Company may be unable to make the principal repayment due that date or meet
all of its covenants that are measured as of that date. The Company is
approaching the administrative agent for the lending syndicate seeking
accommodation in this eventuality. Although the Company is hopeful that there
will be a favorable result from discussions with investors and the lending
syndicate, normal risks apply to the process, including those explained in the
Company's disclosure documents, and there is no guarantee that the Company
will secure accommodation or investment.
    "Timing of major defense orders and extended integration issues have
contributed to an extremely disappointing fiscal 2008 following our
acquisition of Med-Eng a year ago," said David E. Luxton, President and CEO.
The acquisition of Med-Eng was transformational for Allen-Vanguard, making it
a global leader in counter-terrorist solutions against hazards such as
improvised explosive devices and chemical, biological and radiological
threats. However, expected orders for electronic counter measures were
significantly delayed, and integration of sales staff into a coherent global
team affected the pace of some of the Company's more traditional product
sales. "We do not believe that performance in fiscal 2008 is reflective of the
future prospects and sustainable earnings capability of Allen-Vanguard," added
Mr. Luxton. "We have changed and transformed the organization and management
ranks over the past months and have a much stronger execution team going
forward."
    Mr. Luxton went on to say that after a low-water mark in the third
quarter, order visibility and intake are up and backlog has more than doubled
to $100 million, but that the Company remains cautious and is re-calibrating
to operate with a lower cost base and lean management of operations while it
rebuilds revenue. "This remains an attractive long-term business with scale,
core revenue from a global customer base in more than 120 countries, leading
technologies in a growth market, and the ability to deliver EBITDA margins
superior to our industry peers. With these positive long-term fundamentals and
a battered stock price it is understandable that the Company is attracting
interest from outside investors. One of our top priorities is to resolve the
short-term financial requirements on terms that preserve the long-term value
creation opportunity."

    Allen Vanguard

    Forward looking statements

    This press release may contain forward-looking statements, which reflect
Allen-Vanguard's current expectations regarding future events, its strategy,
expected performance and condition. Forward-looking statements include
statements that are predictive in nature, that depend upon or refer to future
events or conditions, or that include words such as "expects," "anticipates,"
"plans," "believes," "estimates" or negative versions thereof and similar
expressions. In addition, any statement that may be made concerning future
performance, strategies or prospects, and possible future acquisitions or
dispositions, is also a forward-looking statement. Forward-looking statements
are based on current expectations and projections about future events and are
inherently subject to, among other things, risks, uncertainties and
assumptions about the Company and economic factors. Forward-looking statements
are not promises or guarantees of future performance, and actual events and
results could differ materially from those expressed or implied in any
forward-looking statements made about the Company. Any number of important
factors could contribute to these digressions, including, but not limited to,
general economic, political and market factors in North America and
internationally, interest and foreign exchange rates, global equity and
capital markets, business competition, technological change, changes in
government regulations, unexpected judicial or regulatory proceedings, and
catastrophic events. We stress that the above-mentioned list of important
factors is not exhaustive. We encourage you to consider these and other
factors carefully before making any investment decision and we urge you to
avoid placing undue reliance on forward-looking statements. Further, you
should be aware that the Company disclaims any obligation to publicly update
or revise any such forward-looking statements whether as a result of new
information, future events or otherwise, prior to the release of the next
Management Discussion and Analysis to be released by the Company or except as
required by law .

    About Allen-Vanguard

    Allen-Vanguard Corporation supports the mission of military and homeland
security forces around the world with leading proprietary solutions for
protection and counter-measures against hazardous devices of all kinds,
whether chemical, biological, radiological or explosive (CBRNE), including
improvised explosive devices (IEDs) and remotely controlled IEDs (RCIEDs).
Allen-Vanguard equipment is in service in more than 120 countries. Products
include Electronic Counter-Measures ("ECM") equipment for jamming remote
detonation of terrorist devices, specialty security equipment for Explosive
Ordnance Disposal ("EOD"), remote intervention robots for hazardous
applications, and personal protective wear for use in dealing with explosive
and bio-chemical agents. Allen-Vanguard is the developer and/or sole,
worldwide licensee of proprietary technologies such as the Med-Eng bomb suit,
the Defender(TM) and Vanguard(TM) Mk2 bomb disposal robots, and the Universal
Containment System and CASCAD Foam system for blast mitigation and
decontamination of bio-chemical warfare agents. Professional services
encompass counter-IED intelligence, training and advisory services, including
the Triton(TM) Report on terrorist incidents around the world. The Company
operates globally through its wholly-owned subsidiaries under the names
"Allen-Vanguard", "Med-Eng" and "Hazard Management Solutions". Head office
operations are located in Ottawa, Ontario, Canada, with manufacturing
operations in Stoney Creek and Pembroke, Ontario; Ogdensburg, New York;
Tewkesbury, U.K.; and Cork, Ireland; The Company has professional services
operations in Shrivenham, UK, Canada and in the U.S. in Arlington, Virginia,
plus sales offices in Canada, the U.S., the U.K. and Asia. Allen-Vanguard's
shares are listed on The Toronto Stock Exchange (TSX) under the symbol "VRS".
    To find out more about Allen-Vanguard Corporation (TSX: VRS), visit our
website at www.allenvanguard.com.
    %SEDAR: 00018026E




For further information:

For further information: David Luxton, CEO, (613) 288-5555

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ALLEN-VANGUARD CORPORATION

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