Has anyone see this???
freeedgar.com
EXHIBIT D
TO
DISCLOSURE STATEMENT WITH RESPECT TO JOINT
REORGANIZATION PLAN OF CAI WIRELESS SYSTEMS, INC.
AND PHILADELPHIA CHOICE TELEVISION, INC.
LIQUIDATION ANALYSIS
CAI Wireless Systems, Inc.
Chapter 7 Liquidation Analysis
As of March 31, 1998
Introduction
The Company believes that the value of the property to be received under
the Plan by each holder of an Impaired Claim is more than the value such
holder would receive in a liquidation of the Company under Chapter 7 of the
Bankruptcy Code. To arrive at that conclusion, the Company estimated and
compared the likely returns to each holder of an Impaired Claim in a
liquidation under Chapter 7 of the Bankruptcy Code and the Plan. The
results of such analyses are set forth below.
The Liquidation Analysis was prepared using CAI's assets as of March 31,
1998, and is based on a number of estimates and assumptions which are
inherently subject to significant economic and competitive uncertainties
and contingencies beyond the control of CAI and/or any Chapter 7 trustee.
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.
Major Assumptions
CAI' operating systems are assumed to be sold in whole or in part
(potentially market by market) to maximize value in the liquidation
process. CAI is required to make certain payments, including payments to
maintain certain lease obligations for equipment and spectrum, until each
system is sold. The net cash expense required for the continuation of
operations is assumed to total $9.2 million. Operations during the
liquidation period would not generate sufficient cash to support such
operations. Funding is assumed to come from a combination of restricted
cash on hand (from funds advanced to CAI by its senior secured lender) and
the extension of additional credit by CAI's current lender. If such credit
was not available, however, CAI would be unable to continue operations, and
the estimated liquidation value of CAI's wireless channel rights would be
approximately $25 million, rather than $91 million (as set forth below).
All assets are assumed to be sold within an average of six months.
All liquidation proceeds are stated in actual dollar terms and have not
been discounted to present values.
Significant reductions in personnel occur at the outset of the
Chapter 7 liquidation. Operating expenses continue to be incurred through
the liquidation period, however, primarily as a result of the continued
employment of individuals necessary to maintain the operating systems and
perform administrative functions required by the Chapter 7 trustee.
During the Chapter 7 liquidation, CAI, through the Subsidiaries,
continues to operate its business and, accordingly, events may occur that
could impact recovery proceeds and Claims to be satisfied. Such events
could include changes in legislation related to the liquidation process and
changes in the market.
If the implementation of the liquidation process is delayed,
significant operating losses and/or changes in assets and liabilities may
be incurred during the interim period until the liquidation is completed,
and the net liquidation value could be significantly below that estimated
herein.
Upon liquidation, actual liabilities may vary significantly from
those reflected on the Company's March 31, 1998 consolidated balance sheet
and in this Liquidation Analysis, because Claims presently unknown to the
Company may be asserted. It is not possible to predict with any certainty
the inevitable increase in liabilities resulting from contingent and/or
unliquidated Claims. Actual amounts may vary materially from these
estimates.
Liquidation values are predicated upon the March 31, 1998
consolidated financial statements provided by the Company. The analysis
does not take into account the effect of operating results or adjustments
to the unaudited financial statements subsequent to March 31, 1998, or
changes in assets and liabilities after that date, except for specific
adjustments described in the assumptions or notes to the Liquidation
Analysis.
This analysis assumes no new litigation and only assumes amounts
already accrued on the consolidated balance sheet to cover known litigation
exposures.
Note A - Actual Book Values as of March 31, 1998
The book values used in this Liquidation Analysis are the book values as of
March 31, 1998 (unless otherwise noted).
Note B - Cash and Cash Equivalents
The Liquidation Analysis assumes that operations prior to and during the
liquidation period will leave the Company with no cash or cash equivalents.
The costs of operating the Company through the six month liquidation period
are projected to be approximately $9.2 million. $2.0 million -of these
costs is expected to be funded from restricted cash proceeds previously
received by the Company under the Note Purchase Agreement.
Note C B Subscriber and Other Receivables
Subscriber and other receivables are due from CAI's analog video customers.
Accounts receivable are assumed to be 47.0%, collectible.
Note D - Prepaid Expenses
Prepaid expenses and other current assets are composed of prepaid
programming, insurance, postage and service contracts. Prepaid expenses
and other current assets are estimated to have no liquidation value.
Note E - Property, Plant & Equipment
The estimated liquidation values of equipment, real estate and other
components of property, plant and equipment are based on discussions
between management, in-house engineers, outside contractors, and vendors.
Equipment includes transmission equipment, subscriber equipment, office
furniture and equipment, leasehold improvements, vehicles, and projects in
progress. Projects in progress is primarily comprised of equipment
purchased for the roll-out of service in Hampton Roads. Based on a
line-by-line analysis, the fixed assets and projects in progress were
estimated to generate $19.8 million in a liquidation, or 39.7% of book
value.
Note F B Wireless Channel Rights, Net
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.
Note G B Investment in CS Wireless
In a liquidation scenario, the value of the CS Wireless equity stake was
assumed to be nominal.
Note H B Investment in TelQuest
CAI's investment in TelQuest is assumed to be sold for $1.4 million.
Note I B Senior Note Escrow
The holders of the Senior Notes have a first priority security interest in
the Senior Note Escrow. The remaining cash balance of the Senior Note
Escrow therefore will be distributed to the holders of the Senior Notes in
any liquidation scenario.
Note J - Goodwill and Loan Acquisition Costs, Net
If CAI ceases to exist on a going concern basis, the value of these assets
will be zero.
Note K - Other Assets
Other assets include notes receivable, intangible assets and deposits and
are assumed to bring $1.1 million in a liquidation.
Note L - Administrative and Priority Claims
See notes T through W.
Note M - Secured Notes
The Secured Notes are secured by a lien on substantially all assets of the
Company. The total amount includes accrued interest of $3.03 million as of
June 30, 1998 and fees of $730,000. An additional $7.2 million will be
required to reflect the additional funding required (primarily to pay
leases) to maintain the value of the Company's assets through the
liquidation process.
Note N - Wireless Channel Right Obligations
Wireless channel right obligations are comprised of both secured and
unsecured obligations. $400,000 of the obligation is secured by channel
rights and is due to Mester. The remaining $4.4 million represents the
exercise price of rights to lease or purchase MMDS channels in the future
and is an unsecured claim.
Note O B Bott Notes
The Bott Notes due to Bott and the Bott Family Trust are collateralized by
the common stock of the Subsidiaries that own certain wireless channel
rights in Buffalo, Syracuse and Albany. The Bott Notes are discount notes.
Note P B Subsidiary Notes Payable
The debt of CAI'S Subsidiaries will be assumed by the acquiror of the
channel rights and Subsidiary stock.
Note Q - General Unsecured Claims
General unsecured claims include accounts payable and accrued liabilities,
less priority claims for, among other things, wages and taxes, Secured
Notes fees, accrued restructuring costs, and accrued interest. (See Notes
M and T through W.) Allocation of the net estimated liquidation proceeds
to general unsecured claims has been made in accordance with priorities set
forth in the Bankruptcy Code, and is pari passu with the Senior Notes.
Note R - Senior Notes
Senior notes are general unsecured obligations of CAI except for the first
priority security interest in the Senior Note Escrow. The total dollar
amount includes accrued interest of $9.9 million as of June 30, 1998.
Percentage recovery includes cash from the Senior Note Escrow. Recovery
would be 16.1% or $45.9 million excluding cash from the Senior Note Escrow.
Note S - Notes Payable and Subordinated Debt
The ECN Notes are subordinated to all senior indebtedness and obligations
collateralized by liens or a security interest in CAI property; they
include accrued interest of $57,533 as of June 30, 1998. The 12%
Subordinated Note is due to Merrill Lynch Global Allocation Fund and
includes accrued interest of $1.2 million as of June 30, 1998.
Note T - Administrative, Consulting and Financial Fees and Attorneys' Fees
Attorneys' fees are assumed to average $75,000 per month for six months.
The administrative, consulting, financial and accounting fees are assumed
to be $1.0 million and include transaction fees for the sale of certain
assets.
Note U - Trustee's Fees
Trustee's fees assumes the receipt of 3% of sale proceeds of property,
plant and equipment and wireless channel rights.
Note V - Accrued Wages, Compensation, Pension and Profit Sharing
Estimated claim represents the balance of accrued payroll at March 31, 1998
and includes payroll, vacation pay, holiday pay, bonus pay, royalties and
commissions, professional fees and accrued promotions entitled to priority
under the Bankruptcy Code. The Company assumes that the number of
employees, if any, with accrued payroll greater than the $4,300 priority
claim limit is insignificant, and hence no amount has been attributed to
such claims.
Note W - Accrued Taxes
Accrued taxes include payroll, property, sales, income and general taxes.
CAI Wireless Systems, Inc
Statement of Assets
For Balances as of March 31, 1998
($000)
<TABLE>
<CAPTION>
Estimated Estimated
Book Value Recovery Liquidation
31-Mar-98 A Rate (%) Value Notes
<S. <C> <C> <C>
ASSETS
Cash and Cash Equivalents $10,410 0.0% $ 0 B
Subscriber & Other Receivables 387 47.0% 182 C
Prepaid Expenses 662 0.0% - D
Current Assets 11,458 182
PP&E, Net and Projects in Progress 49,898 39.7% 19,800 E
Wireless Channel 194,051 47.1% 91,384 F
Investment in CS Wireless 43,338 0.0% - G
Investment in TelQuest 3,175 44.1% 1,400 H
Senior Note Escrow 16,419 100.0% 16,419 I
Goodwill (Non-deduct) 22,986 0.0% - J
Loan Acquisition Costs, Net 7,079 0.0% - J
Other Assets 3,062 35.9% 1,100 K
TOTAL ASSETS 351,466 37.1% $130,285
</TABLE>
CAI Wireless Systems, Inc.
Distribution of Estimated Proceeds of Asset Liquidation
For Balances as of March 31, 1998 *
<TABLE>
<CAPTION>
Allowable Recovery Percent
($000) Claims Amount Recovery Notes
<S> <C> <C> <C> <C>
Estimated Proceeds Available
for Distribution $130,285
Less Escrow Cash for Senior
Noteholders $16,419 I
Net Proceeds Available for
Distribution $113,866
Administrative & Priority Claims:
Administrative Claims $4,786 $4,786 100.0% L
Priority Claims $1,911 $1,911 100.0% L
Total $6,696 $6,696 100.0%
Estimated Proceeds After
Administrative and Priority Claims $107,170
Secured Creditor Claims:
Secured Notes* $55,951 $55,951 100.0% M
Wireless Channel Right
Obligations $400 $400 100.0% N
Bott Notes $3,841 $3,841 100.0% O
Total $60,193 $60,193 100.0%
Subsidiary Debt:
Subsidiary Notes $43 $43 100.0% P (Assumed)
Estimated Proceeds After Secured Claims $46,977
Senior Unsecured Claims:
General Unsecured Claims $6,911 $1,113 16.1% Q
$275 mm Senior Notes* $284,919 $62,283 21.9% R
Total $291,830 $63,396 21.7%
Estimated Proceeds After Senior
Unsecured Claims $0
Unsecured Claims:
12% Subordinated Note* $31,208 $0 0.0% S
Wireless Channel Right
Obligations $4,433 $0 0.0% N
ECN Notes* $2,851 $0 0.0% S
Total $38,491 $0 0.0% S
Estimated Deficiency ($266,926)
</TABLE>
* Includes accrued interest through June 30, 1998.
<PAGE>
CAI Wireless Systems, Inc.
Administrative and Priority Claims
($ 000)
<TABLE>
<CAPTION>
Estimated
Claims Notes
<S> <C> <C>
Administrative Expenses:
Administrative, Consulting and Financial Fees $1,000 T
Attorneys' Fees 450 T
Trustee's Fees 3,336 U
Estimated Administrative Expenses $4,786
Priority Claims:
Accrued Wages, Workers' Compensation,
Pension & Profit Sharing 365 V
General, Payroll and Sales Taxes 1,545 W
Estimated Priority Claims $1,911
Estimated Total Administrative and Priority Claims $6,696 |
