NextWave analysis - from talksfree on FOOL
Date: 8/7/01 8:56 AM
Good article, as usual. Just as background, here is how the court analyzes the New
Wave problem.
When a creditor files bankruptcy, no creditor can take any action against any of the
creditor's action without the permission of the bankruptcy court (called relief from the
automatic stay). Any action taken by a creditor without the permission of the bankruptcy
court is void. Since the FCC terminated the licenses it granted to New Wave without
permission of the bankruptcy court, its actions were void, not merely voidable.
If the Supreme Court review this matter, it will not review to set policy, but rather to
interprete the bankruptcy code, and to determine if it was followed. Unless there is a
separate federal statute that "trumps" the bankruptcy code and allows the FCC to take
back the licenses without bankruptcy court approval, the case should be simple. If
permission was not obtained, the bankruptcy code establishes that the action was void.
If the FCC action was void, then the FCC would have to go back to the Bankruptcy
court and ask for permission to again terminate the licenses. However, the bankruptcy
court would look at New Wave's reorganization plan and balance it against the FCC's
claim. If NewWave's Plan of Reorganization calls for payment in full of all creditors, and -
this is most important- the plan of reorganization is feasible (it most likely can be
acheived), the court will most likely not grant the relief from the stay.
If New Wave has the cash to pay the creditors in full, and has contracts to start the build
out, the bankruptcy court will be very hard pressed to grant the FCC's motion for relief
from the stay to terminate the license.
The settlement negotiations everyone is urging is, I believe, Verizon's only way to obtain
the spectrum. However, the government's negotiating position makes it a very difficult
negotiation. In order to have a successful negotiation, a party has to have something that
the other party wants and needs. In this case, I do not see where the government has
anything NewWave wants or needs (NewWave has determined that it already owns the
licenses and has a viable plan of reorganization). Therfore, why should NewWave even
negotiate at all.
I believe New Wave will win and will complete the build out (or sell the spectrum if it is
running a bluff). However, in either case, NewWave holds all the cards.
I do not see much hope for Verizon etc. in resolving the NewWave matter.
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