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News Story

Allen-Vanguard Corp. (TSX:VRS) has bought some time with the announcement that its lenders have granted a one-month extension for a $10-million payment due yesterday.

The Ottawa-based defence products company said it has reached an accommodation agreement with a syndicate of its lenders, led by RBC, to defer to Oct. 31 the deadline for the quarterly payment on its $200-million line of credit.

Allen-Vanguard said in September that it might miss the payment after the collapse of a deal that would have seen an outside investor buying a significant investment position in the company. That announcement was followed by the news a week later that Allen-Vanguard would be slashing 100 jobs from its workforce of 660, in order to generate annual savings of $6.5 million.

"The company meanwhile continues to explore recapitalization alternatives with various interested parties in conjunction with advisory work by its investment bankers and other outside advisers," the company's Wednesday morning statement read.

Versant Partners analyst Neil Linsdell wrote in an e-mail that the extension was to be expected since the company must first settle the matter of an equity injection, or else win major contract awards that will allow it to pay its debts.

"Investors will likely still be jittery until this matter is definitively resolved," wrote Mr. Linsdell, who has a 'speculative buy' rating on Allen-Vanguard and a target stock price of $1.90.

However, he noted that the extension announcement, along with the posting of a solicitation notice that suggests that the U.S. Marines plan to continue using Allen-Vanguard's Chameleon bomb jammers for the next six years, "should give investors a little more confidence in the near- and longer-term."

Shares of Allen-Vanguard were roughly flat on Tuesday afternoon, closing at the same price as its opening of 34 cents.