FCC ASKS COURT TO REJECT ‘SKELETAL’ NEXTWAVE BANKRUPTCY FILING
FCC asked U.S. Bankruptcy Court, White Plains, N.Y., Fri. to reject NextWave’s “speculative and skeletal disclosure statement” that is part of its pending plan of reorganization. Wide-ranging objection by Commission assailed lack of information about NextWave’s financing, business plan, expected cash flow, use of funds, market analysis and liquidation plan. “It is impossible for this court or any creditor to make an informed judgment about the proposed current plan,” FCC said, contending it was “unconfirmable on its face.” Objection underscored that NextWave’s compliance with eligibility requirements for regaining its PCS licenses still had to be decided in pending regulatory proceedings. “It is both premature and misleading for NextWave to affirmatively represent to creditors that it believes itself to be in compliance with the various eligibility requirements for the licenses,” FCC said: “Any such representation must be tempered by language apprising creditors that the threshold question of its eligibility to hold the licenses is a matter to be decided by the FCC alone, and that this court lacks jurisdiction to issue any orders with respect to the question of NextWave’s compliance.” Meanwhile, group of investors that included CIBC, Liberty, Pacific Capital Group and TPG Partners also filed objection to disclosure statement Fri.
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FCC Wireless Bureau said late Fri. it was updating its licensing records to reflect U.S. Appeals Court, D.C., mandate that overturned earlier cancellation of NextWave licenses for nonpayment. NextWave licenses are being returned to “active” status, bureau said. FCC reiterated it plans to ask U.S. Supreme Court to review appeals court ruling and said “there are potential or ongoing related regulatory proceedings before the Commission.” Agency said: “These litigation and/or regulatory matters may affect the status of the involved licenses.” FCC action follows remand mandate that D.C. Circuit issued Aug. 30 by undoing license cancellation and taking NextWave back to where it was in 1997 when Commission had granted conditional approval of licenses. Commission at that time had conditioned license grant on NextWave demonstrating it was in compliance with foreign ownership restrictions, decision which itself was challenged by 2 unsuccessful auction bidders. This summer, Alaska Native Wireless (ANW), VoiceStream and Verizon Wireless petitioned Commission, challenging NextWave’s designated entity status and foreign ownership compliance. ANW and VoiceStream also petitioned agency last week, asking that FCC deny reinstatement of licenses.
In its bankruptcy court filing, FCC argued that NextWave didn’t disclose “the most basic information” on how its reorganization plan would be financed, including $2.5 billion in debt financing and up to $3 billion in convertible preferred stock. Equity commitments from investors contain, in some cases, “blank spaces where disclosures” ought to be, FCC said. “NextWave’s failure to disclose the amount of its equity commitments for initial working capital cannot be remedied merely by ‘filling in the blanks,'” it said. Agency, which is NextWave’s largest creditor, told court that bankrupt carrier should have to disclose to creditors identify of those providing equity commitments. FCC raised some of same control questions that came up in petition filed Aug. 30 by Alaska Native Wireless and VoiceStream (CD Aug 31 p1), asking agency to deny reinstatement of NextWave’s licenses and questioning control that recent investors held over carrier’s business plan.
FCC filing ticked off conditions of $2.5 billion debt facility that UBS Warburg agreed to provide NextWave. “Apparently, UBS Warburg has unbridled, unilateral discretion to back out of the bridge facility, creating serious doubts as to whether NextWave has firm financing in place.” Conditions give UBS Warburg leeway to approve NextWave’s resale contracts with strategic partners and require that there be no pending “administrative or judicial proceeding” that would challenge NextWave’s ability to hold licenses, FCC said. “These conditions precedent to funding provide UBS Warburg with nearly unfettered discretion to back out of the bridge facility and create serious doubts as to whether this is a firm financial commitment,” Commission said.
Among details NextWave disclosure statement lacks is identification of prospective partners for its mobile virtual network operator distribution, FCC said. “Indeed, wireless telecommunications market analysts have expressed deep skepticism about NextWave’s business strategy which is not adequately reflected in the disclosure statement,” filing said. Commission said NextWave didn’t include projections such as when it would reach positive cash flow. Ability of NextWave to retain licenses hinges on carrier’s being able to make full and timely installment payments to FCC for licenses after reorganization plan is confirmed, it said. “There is no concrete information about possible future sources of capital necessary to meet such payment obligations.” Commission questioned analysis in NextWave disclosure statement that projected liquidation sale of licenses could result in up to 45% less in proceeds than nearly $16 billion value placed on spectrum in Jan. re-auction. FCC said that analysis envisioned “one-day sale” conducted by trustee, while other market tools could be used to realize value of licenses.
Group of investors that also filed objection Fri. raised some concerns similar to FCC’s about what they considered to be lack of detail in disclosure statement. In Dec. 1999, firms entered into subscription agreement with NextWave to fund first plan of reorganization by purchasing total of $900 million in preferred stock. Their filing disputed NextWave’s characterization that original subscription agreements had expired as result of delayed confirmation of reorganization plan and because of NextWave’s proposing 2nd modified plan. NextWave has “simply walked away from” agreements with these firms, they said.