IT voice and data integrator, Commander Communications will cut 600 staff members in a bid to ensure costs savings and return profitability to the company.

Commander has currently drawn down $335 million of its debt facility, excluding bank guarantees and letters of credit.

A banking syndicate has agreed, subject to documentation, to amend the debt repayment schedule by rescheduling the $115 million 31 October 2008 facility repayment to 31 October 2009.

In addition, as part of the financing of the proposed restructure, the banking syndicate has agreed to re-schedule $7 million of the $10 million repayment due on 28 February 2008 to 31 October 2009.

The banking syndicate has also agreed to replace the Company’s existing financial covenants with a single covenant related to EBITDA from 1 April 2008.

The Company is required to suspend dividend payments and not to make any capital distributions until the debt facility reduces to $250 million, excluding bank guarantees and letters of credit, unless otherwise agreed by the banking syndicate.

The proceeds from the sale of non-core businesses must be applied to prepay the
bank facilities, and will be available for redraw within facility limits.

After a detailed strategic review of its business operations, Commander Communications’ new management team has come up with a ‘turnaround plan’. The plan restructures the business to focus on delivering shareholder value and restructure company operations to deliver a reduction in overhead costs and establish a profitable business growth.

As part of the plan, Commander will exit reselling hardware. According to the service provider, Commander currently derives significant revenue, but not profit, from the simple resale of high volume, low margin IT Hardware. This has created significant back end cost and complexity in the business including logistics and working capital.

Commander stated it “will continue to resell IT Hardware where it is associated with the provision of professional and technical services. However it will substantially exit the stand alone resale of low margin product”.

The exit from these business segments will substantially reduce transactional volume throughout the group. This allows a reduction in the number of employees currently employed by the Group from approximately 2000 to 1400.

Management numbers and levels will be significantly reduced. Other reductions will primarily come from the IT hardware group and supporting functional areas.

In an ASX announcement Commander said it will ensure that all employees affected by the changes receive full entitlements as well as career transition support.

Amanda Lacaze, managing director and CEO of Commander, said the strategic review showed that some areas of the business were underperforming or were simply unprofitable.

“By taking decisive action today, I am confident we can maximise value for both customers and shareholders. I am disappointed with the half year business performance, both at an EBITDA and cash level. With this plan I am confident we can leverage improvements in both,” she said.

According to Lacaze operating cash performance is improving as a result of increased management focus and the early execution of some areas of the turnaround strategy.

“I am saddened that it has been necessary that so many staff leave the business but in taking this action I believe we are setting a robust platform for the remaining staff and further growth,” she said.