NEW YORK-Chalk one up for the Federal Communications Commission, which received a stay Aug. 31 of several lower-court decisions that affirmed key aspects of the bankruptcy reorganization of C-block carrier NextWave Personal Communications Inc.
As such, NextWave’s Chapter 11 reorganization confirmation and consummation hearing is put on indefinite hold because of last week’s ruling by the U.S. Court of Appeals for the Second Circuit. The reorganization hearing had been scheduled to occur Sept. 8 before the U.S. Bankruptcy Court for the Southern District of New York in White Plains. NextWave is based in nearby Hawthorne, N.Y.
The three-judge panel for the Second Circuit ordered attorneys for both sides to submit briefs within two weeks. They said their court clerks would set a hearing date as soon as possible thereafter, within the constraints of other cases already scheduled.
Represented by the U.S. Attorney’s Office in New York, the FCC does not contest the bankruptcy court’s earlier decision to lower NextWave’s C-block bid obligation to about $1 billion from $4.7 billion.
Instead, the commission is contesting the bankruptcy court’s jurisdiction over it. The FCC has taken the position it is not a typical creditor but a federal agency with status that supersedes the purview of federal and state bankruptcy laws and the tribunals that adjudicate them.
A provision that would exempt the FCC from the bankruptcy courts’ jurisdiction is pending before Congress in one chamber’s version of federal spending legislation for the next fiscal year, which starts Oct. 1.
“If Congress wants to reverse that, I don’t know if we can deny their will or if they can do so retroactively,” said Judge Jon O. Newman, one of the three judges on the Second Circuit’s panel.
Judge Dennis G. Jacobs initially scheduled a hearing on the FCC’s appeal for Oct. 18. However, the judges agreed to accelerate the process as much as possible after Deborah Schrier-Rape, NextWave’s lead attorney, said, “It is critical to the debtors that (bankruptcy reorganization plan) confirmation occur before Oct. 1.”
This summer, two judges in the U.S. Bankruptcy Court for the Southern District turned down the FCC’s request for a stay of that court’s decisions so the FCC could appeal them. Most recently, Judge Adlai S. Hardin Jr., who earlier had reduced NextWave’s C-block license bid obligation, denied the FCC’s motion Aug. 25.
As one basis for his latest decision in this ongoing case, Judge Hardin accepted the assertions of NextWave executives that the fledgling carrier’s $750 million in new financing commitments from tower companies and equipment manufacturers would be jeopardized should a drawn-out appeals process ensue.
By contrast, the Second Circuit panel seemed unconvinced potential financial backers of NextWave would back out of their commitments if the bankruptcy reorganization confirmation and consummation hearing does not take place Sept. 8 as originally scheduled.
“A lot of lenders say their offer is good only for a specific length of time … Does this financing have a time limit?” Judge Newman asked.
In response, Schrier-Rape did not offer a date by which NextWave’s new lenders would back out. Instead, she said NextWave executives had testified before Judge Hardin that delays in completing a court-approved bankruptcy reorganization could place financing commitments “in grave jeopardy.”
In the Aug. 25 hearing before Judge Hardin, NextWave officials said the bankruptcy court’s reduction in the amount owed for C-block radio-frequency licenses had afforded the company access to financing it had not previously been able to gain.
NextWave plans to be a carrier’s carrier, offering fixed wireless local loop service, first for telephony and high-speed Internet access. Later, it plans to provide third-generation Code Division Multiple Access mobile voice and data services.
In a separate announcement Aug. 31, NextWave said that, in votes cast “by every class of creditors and equity interest holders … over 99 percent were acceptances” of its bankruptcy reorganization plan.
“In fact, no objections to confirmation of the plan were filed by the court-ordered deadline, so the confirmation hearing, when convened, will be uncontested,” the company said.
In related news, the Cellular Telecommunications Industry Association said it sent a letter to FCC Chairman William Kennard stating its concern that the way the FCC has handled the NextWave licensing issue damages the integrity of the licensing process. CTIA asked the commission to establish and publish procedures that would allow other companies to bid on NextWave or any other designated-entity spectrum.
