Tim:
Unfortunately, the "as expected" comment is more reasonable than you might otherwise think. General Wireless, another C-Block license holder, went chapter 11 some time ago. During the bankruptcy process, the judge ruled from the bench that the licenses had been overvalued at the point of sale and reduced GWIR's debt to the government by $1,120mm to $166mm (a $954mm reduction).
Please do not ask me to explain the legal doctrine in detail, because it is complex and abstract, but in general terms a debtor, seeking court relief, generally cannot be obligated to pay more than the current value of the specific collateral against for which the claim is based. For example, suppose you and I bought a building for $100mm, with no money down, and Citibank provided 100% financing. If it turned out that two years later, the building's market value was only $50mm, and Citi tried to force us to pay back all $100mm, we could seek bankruptcy relief and likely "cram down" Citi by $50mm. As I said, I can't explain why this is fair, reasonable or just--but that's a possible and likely outcome under our legal system.
Once GWIR demonstrated that it could cram down the FCC, Nextwave and a raft of other C-Block bidders all stood up and said "we want the same deal!" Obviously, if the GWIR court victory stands (and the statute of limitations and other issues are consistent), then Nextwave and others would be crazy not to go for the same deal. However, GWIR's court victory is being appealed (which will take time), and the FCC refused to grant an extension past June 8th for the other C-Block participants to decide on the current, far, far less favorable FCC option menu.
Given the alternatives, N/W really had no choice but to enter Chapter 11. It's sad and wasteful.
Hope this is illuminating.
Gregg |
