dotcomscoop.com
EXCLUSIVE: Bondholders seek shutdown of Excite@Home service
Thursday, November 8, 2001 @ 12:54AM EST by: editor
Bondholders owed $747 million by bankrupt broadband provider Excite@Home (At Home Corp.) have filed a motion asking a judge to shutdown the company's service. The motion, which was obtained by Dotcom Scoop, will be heard by the judge on Nov. 15 and if approved, the company's estimated 4 million subscribers could be without service.
The motion asks that the judge reject distribution agreements that Excite@Home has with cable providers; including Cox and Comcast. The bondholders are asking that these agreements be rejected because they do not offer fair value to Excite@Home. At the heart of this argument is a bid made by AT&T to acquire the broadband assets of Excite@Home for $307 million. AT&T holds a twenty-three percent stake in Excite@Home and until last week, AT&T controlled its Board of Directors.
"Only the prospect of turning off the switch will unlock the true value, and here is why. If At Home terminates service to a cable company, the cable company’s subscribers will all need new e-mail addresses. Additionally, the phenomenal growth and market capitalization multiples being enjoyed by the cable companies stem from the cable companies’ ability to add 400,000 subscribers a quarter to At Home’s service. Simply put, the value to cable companies of their At Home contracts is enormous, while At Home has negative cash flow!," reads the bondholder's motion.
The bondholders argue that agreements to distribute Excite@Home service across Cox and Comcast cable lines have been manipulated in a series of deals also involving AT&T. Bondholders say the value of Excite@Home's assets will be proven when AT&T, Cox and Comcast have to scramble to provider customers with Internet access.
"While At Home’s network is captive to the Controlling Cable Companies [At&T, Cox, Comcast], the Controlling Cable Companies are captive to At Home. The cable companies cannot effect a transition of customer service and their customer’s e-mail addresses to another network backbone provider without substantial time, expense, aggravation, and risk. By authorizing the immediate rejection of the MDAs [Master Distribution Agreements], including the MDA with AT&T, the counterparties to those MDAs, who cannot implement their business plans without At Home and who have the resources to pay in full the claims of At Home’s creditors, can pay At Home the true value of At Home’s assets."
In early October, creditors succeeded in getting Excite@Home to briefly stop taking on new subscribers. The company quickly renegotiated its deals with AT&T, Comcast and Cox, and resumed taking on new subscribers. But bondholders still feel the deals in place are not appropriate. Even with the new deals, bondholders say that the MDAs work only to AT&Ts advantage.
"At Home would be wasting its current cash to add and maintain subscribers for a system AT&T would buy. Thus, allowing the MDAs to continue is tantamount to allowing AT&T to further misappropriate At Home’s assets for its own benefit, all to the detriment of At Home’s creditors," the bondholders assert.
In the meantime, a group of Excite@Home shareholders has launched a campaign to keep the company in the business. Shareholders fear that if the company is liquidated, they, along with the creditors, will lose any chance of recouping their losses. The shareholders have written a reorganization plan aimed at keeping the company in business.
Bondholders, shareholders, and current and former Excite@Home employees who have spoken to Dotcom Scoop in the past, readily agree that AT&T has forced Excite@Home into bankruptcy, as evidence by the summary statement made by bondholders in their motion.
"In short, AT&T can show neither fair dealing nor fair price. Quite to the contrary, over the last two years, AT&T has consolidated its control to the detriment of the Debtors, released other cable companies from exclusivity requirements in connection with the consolidation, driven At Home into bankruptcy, and as the coup de grace, sought to purchase the Debtors’ assets at a ridiculously low price. To make matters worse, a section 363 auction process here provides absolutely no comfort that a fair price will be obtained precisely because there will be no real auction: there only is one buyer for this asset, and that buyer is also the controlling shareholder -- AT&T." |
