filed for bankruptcy on Tuesday after the company defaulted last week on certain covenants of its credit agreement with Tennenbaum Capital Partners.
"The Board approved the decision to file for bankruptcy protection only after exhausting all alternatives to preserve shareholder value and to fulfill the company's obligations to its creditors and employees," said Cyril Yansouni, Read-Rite's chairman, in a statement released Tuesday.
The company, which supplies magnetic recording heads for hard drives and tape drives, filed a voluntary petition for relief under Chapter 7 of the U.S. bankruptcy code. In the second quarter ended March 31, its net loss was $35.9 million on sales of $40.9 million, or $1.48 per share.
When Read-Rite lowered its third-quarter outlook in early June, it blamed its limited cash reserves for its inability to "maintain a smooth flow of materials and components to its Thailand operations," while it continued to look for additional sources of financing to fund the production ramp of its 80-gigabyte products.
As of March 30, the company reported cash reserves of $4.2 million.
Read-Rite shares were down more than 75%, or 43 cents, at 14 cents around noon Wednesday on the