AtHome group details reorganization plan, faults AT&T
cedmagazine.com
A group of ExciteAtHome shareholders outlined a reorganization plan for the bankrupt company that says, with small modifications, the company can become profitable by early next year. The group also faults AT&T management in part for what it considers an unnecessary bankruptcy.
The plan, detailed in a filing with the U.S. Bankruptcy Court in San Francisco last week, also asked the court to appoint a trustee and to recognize the group of 150 minority shareholders as an official shareholder equity committee.
"The main thrust of the presentation is to find a solution for this that satisfies all constituencies," says Frank J. Thomas, part of the group's seven-member executive committee. Thomas says he has spent 16 years working on high-tech turnarounds. "Right now, there are several groups at odds with one another." The group is trying to find a solution that will prevent tie-ups in litigation after the bankruptcy, he says.
The plan also reflects the group's belief that the company shouldn't have filed for bankruptcy and that it can be cash-flow positive by early next year, Thomas says.
Key in the plan, he adds, is a comparison chart demonstrating consumer adoption numbers of various technologies. Most technologies have a 10-percent consumer adoption rate in the first five years, and the second five-year period shows a 90 percent adoption rate.
"It's crucial in the sense that AT&T knew that explosive growth was ahead for AtHome," Thomas says. "They had to do a bankruptcy this year. They would not have been able to justify it in the following years."
The plan includes "stripping away the present management," including board members, he says. "We believe that AtHome is in the situation it's in because of the self-dealing that AT&T had in this company," he says.
AT&T recently pulled several of its six executives from AtHome's board, leaving two. That board is a key point of contention with the group, which questions why so many top-level executives spent so much time on a $600 million company, he says. "How could so many senior guys lead it into bankruptcy? ... If all that firepower can't manage a $600 million company, how can they handle a $65 billion one?"
An AT&T spokesman could not be reached by CEDaily's deadline.
Under the plan, AtHome would emerge from its reorganization focusing on high-speed Internet access, network infrastructure and start-page capabilities. Its consumer access, commercial services and international segments would form the Broadband Business and be the core of the new AtHome.
Further, the company would eliminate media and advertising as a strategic business unit, and the Excite portal would switch to a portal operator "in exchange for a percentage of transactions conducted through the ATHM start page and ISP functionality," the group said in the filing.
The group also notes that AtHome's March 2000agreement with Cox Communications, AT&T Broadband and Comcast Cable Corp., giving Cox and Comcast the right to terminate service, violates the cablecos' fiduciary responsibilities as controlling shareholders and members of the company's board. "Therefore, we believe a legal basis for an extension exists," the filing says.
The group also advises retaining AT&T's MDA, which isn't cancelable and still has a few years on it, and renegotiating all of the MDAs to all parties' benefit. It also suggests setting a fixed monthly fee per subscriber and "decline annually based on the total number of subscribers so that the cable companies benefit from ATHM's economies of scale."
Other points include canceling all warrants issued to cablecos based on homes passed and a requirement that cable companies pay monthly fees to AtHome in advance "instead of in arrears." That would cut the company's need for working capital financing, the group says. The group also suggests other financing and short-term loans in indeterminate amounts and long-term loans in the $100 million area.
Late last month, the shareholder group said it had formed to fight the bankruptcy, starting with a proposed asset sale set for an Oct. 29 approval in the bankruptcy court. Led by a seven-member executive committee, the group at the time calculated the company's worth was closer to $3 billion than the $307 million AT&T was offering for its assets, and said that the company could continue and become profitable with a few adjustments.
If the judge didn't approve the sale, said group spokesman Bob Garrity, the group would form an equity committee, which would be on an equal level to the creditors' committee. It would then work with the creditors' committee, he said, to demonstrate how the company could be reorganized and made profitable. While ExciteAtHome would get first shot at a reorganization plan, Garrity said the group had devised one and had in mind several potential executives who could effectively carry out the plan.
Nov. 9, ExciteAtHome announced it would sell $10 million in assets to infoSpace Inc., including certain domain names, trademarks and user traffic, but not physical assets. It also called for Excite to provide "certain transition assets" to InfoSpace. The deal was subject to bankruptcy court approval, and any potentially higher bids.
Likewise, an auction has been scheduled for Dec. 4, but Thomas says whether or not that occurs depends on what emerges from the court after reviewing the group's plan, which will be discussed in a meeting with AT&T and ExciteAtHome on Nov. 30, although that date may change, he says.
Finally, a bankruptcy court judge just issued a statement reducing activities of PricewaterhouseCoopers in its work with AtHome, Thomas says. The accounting and consulting firm has both AtHome and AT&T as clients.
Related story:
Ad hoc shareholder group to fight AtHome bankruptcy |
