NEW YORK-Geotek Communications Inc., Montvale, N.J., said it plans to restructure the company because it does not have the finances to continue current operations and meet future goals.
“Cash resources at May 15 are insufficient to fund both … current operations and the full implementation of [the] business plan in the short and long term,” Geotek said. “The company needs immediate concessions and funding from … debt and preferred equity holders, as well as trade creditors, in order to reach a satisfactory restructuring plan.”
The company said it had an unrestricted cash balance on hand of about $12 million as of March 31.
Geotek has retained Rothschild Inc., New York, as its financial adviser for the restructuring effort.
The company further said the Nasdaq National Market, one of two exchanges on which its stock trades, is considering whether to continue its listing. Geotek stock also trades on the Pacific Stock Exchange.
Geotek uses Frequency Hopping Multiple Access wireless technology aimed at serving fleet-based communications businesses through its Driver Logistics System, which enables mobile work forces to perform several tasks while on the road.
At the end of the first quarter, Geotek said it had 800 customers, with 17,053 subscriber units activated and 14,238 in service. During that period, Geotek earned $4.4 million in wireless operations revenues, up from $3.7 million during the same period a year earlier.
“Ongoing wireless communications activities generated a loss before interest, taxes, amortization and depreciation of $34.3 million for [the first quarter], compared to a loss of $23.4 million in the same period of 1997,” the company said.
“Selling and marketing expenses increased 72 percent to $7.6 million as the company expanded its direct selling activities and launched new strategic marketing initiatives to support its U.S. network rollout.”
Geotek said all of its customers are in markets where mobile fleet activity is concentrated: New York/New Jersey, Dallas/Fort Worth, Houston and San Antonio, Texas; Miami, Washington, D.C., Baltimore, Boston, Philadelphia, Phoenix and Tampa/St. Petersburg, and Orlando/Daytona Beach, Fla.
Also during the first quarter, Geotek sold its European Network Assets subsidiary for $87.1 million, realizing a net gain of $58.6 million. However, the use of those proceeds is restricted under a repayment indenture with holders of the company’s approximately $300 million in outstanding debt.
Geotek said it “has initiated discussions with certain of its largest debt … and preferred equity holders in an effort to address these concerns and continues to seek a capital infusion from strategic partners, financial investors and others as part of an overall capital restructuring.”
Through the first quarter, Geotek said it had spent $15.4 million of a $100 million credit facility with Hughes Network Systems to purchase FHMA infrastructure.
As a result of Geotek’s announcement, Standard & Poor’s Corp. said May 18 it placed the speculative grade CCC+ ratings of Geotek and its $300 million in outstanding senior secured debt on CreditWatch for possible downgrade.
“These events, together with a minimal revenue base and uncertainties regarding the company’s recently revised business strategy, heighten concerns related to the company’s ability to pay its outstanding debt, the majority of which is privately held,” said Rosemarie Kalinowski, a telecommunications analyst for S&P.
