Scott,
1) CAI is attempting to show that its asset values under the proposed (Chapter 11) reorg plan will be greater than its values should the plan be rejected and a (Chapter 7) liquidation took place.
2) The liquidation analysis is based on estimates & assumptions made by CAI and NOT by an independent appraisor!!!
3) CAI disclaimer: ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE VALUES REFLECTED IN THE LIQUIDATION ANALYSIS WOULD BE REALIZED IF CAI WERE, IN FACT, TO UNDERGO SUCH A CHAPTER 7 LIQUIDATION, AND ACTUAL RESULTS COULD VARY MATERIALLY FROM THOSE SHOWN HERE.
4) Most of the major assumptions seem reasonable... but I must strongly disagree with Note F:
The value of the wireless channel rights was determined based on the results of the FCC's LMDS auction which occurred in March of 1998. LMDS spectrum can be used for telephony, high speed data and subscription television services, and consists of two blocks, a 1,100 MHz block at a 28 GHz frequency and another 150 MHz block. While CAI only has a portion of 198 MHz of bandwidth at the 2.5 GHz frequency, this bandwidth is much more efficient than bandwidth at the 28 GHz frequency. This enhanced efficiency should allow MMDS companies to offer the same capacity of services as entities utilizing LMDS spectrum. Furthermore, the LMDS auction may provide a proxy for a liquidation value because any liquidation of the Company would result in an auction of its spectrum on a market-by-market basis.
An analysis of the net price paid "per POP" (an industry term for "per person") for the top 20 markets determined that the average price per POP was $3.17. This figure was multiplied by CAI's 44.8 million POPS (in major markets) and then discounted by the weighted average percent of channels that CAI does not control in each market. In CAI's top twelve markets, the Company controls a weighted average (using the population of each market as the weighting factor) of 29.6 of the total 33 channels (6 MHz) within the MMDS spectrum. The resulting value was further reduced by the present value of ten years of estimated future lease payments on leased channels.
CAI's valuation of its MMDS/ITFS spectrum is a joke!!! I will post my arguments later (I am also too tired) and seek the expert opinion of WTC. It is also not clear to me how CAI came up with the book value of its investment in CS Wireless.
In summary, CAI is claiming a total book value of $351.5M (as of March 31, 1998). That's the reason common shareholders are ending up with nothing! I truly believe CAI's spectrum rights should have been valuated significantly higher. I am shocked that CAI management would make such a poor effort to fight for the company's equity and allow it all to get wiped out in the first round. I also believe that CAI management is breaching a fiduciary duty to its shareholders while attempting to enrich itself with the new incentive package.
Zorro |
