Rambus ( RMBS) is in a spat with certain of its bondholders, which puts the company at risk of repaying $160 million in notes within the next month. In a Security and Exchange Commission filing late Thursday, Rambus said that it received a notice from U.S. Bank National Association contending that it had defaulted on the terms of its zero-coupon convertible notes due 2010. U.S. Bank serves as the trustee for the bonds. Rambus said it does not believe that it is in default and disputed the amount of time that U.S. Bank claimed remained on the clock before any obligation to accelerate payment of the bonds occurred. Shares of Rambus slipped 1.8%, or 34 cents, to $18.70 in extended trading. Rambus is not the first company to be hit with such a claim in the wake of the stock option-backdating controversy. As companies have launched internal investigations into their past stock option-accounting practices, many have had to delay filing their quarterly and annual reports with the SEC. This has provided grounds for bondholders to claim that the companies have violated the terms of their bonds, which often require financial reports to be filed to both the SEC and the trustee at regular intervals. In August, Vitesse Semiconductor ( VTSS) said it had received a similar notice from U.S. Bank seeking to accelerate payment of $96.7 million in convertible subordinated debentures due 2024.
Unlike Vitesse, which has only $30 million in cash on its balance sheet, Rambus had roughly $416 million in cash, cash equivalents and marketable securities at the end of June. Rambus says it has adequate financial resources to pay any unpaid principal and interest on the notes in the event of a default. Additionally, the Los Altos, Calif., company said its recent failure to file its quarterly earnings report with the trustee did not violate the terms of the bonds. According to Rambus, the company is required to give the trustee copies of reports within 15 days after they have been filed with the SEC. That, contends Rambus, implies that the trustee's right to receive financial reports is contingent upon the SEC first receiving the filings. "Since the company's Form 10-Q for the quarter ended June 30, 2006 has not been filed with the SEC, the company is under no obligation to file it with the trustee," read a statement by Rambus. Rambus also said it would have until Nov. 7 to rectify the situation by filing its report. U.S. Bank contends that Rambus has until Oct. 17 to stave off an official event of default. In the event of default, Rambus said that all $160 million in principal would be due immediately, as well as any additional interest, which accrues at a rate of 2% per year.