NextWave Telecom Inc.’s bankruptcy court last week refused to lift a restraining order that bans Nextel Communications Inc. from soliciting votes from NextWave’s creditors on an alternative reorganization plan and making public statements about its discussions with the creditors.
Nextel, with blessings from the Federal Communications Commission and the Department of Justice, is trying to obtain control of NextWave’s 95 personal communications services licenses through an alternative reorganization plan it says has better benefits for NextWave’s creditors than the one they already approved.
Nextel was angered by a press release NextWave disseminated earlier this month in which NextWave Chairman and Chief Executive Officer Allen Salmasi dispelled rumors that NextWave and Nextel had reached an agreement on Nextel’s proposed plan of reorganization. He said the two companies had not reached any agreements, and NextWave was not contemplating any future transactions with Nextel. NextWave said rumors that a deal was in the works with Nextel hurt the company’s negotiations with new investors and potential strategic partners.
Salmasi’s statements, which Nextel characterizes as false and misleading, hurt Nextel’s stock since Nextel was not allowed to defend itself in public, Nextel said.
Since the August restraining order-which still allows Nextel to negotiate with NextWave’s creditors’ committee-Nextel says it has engaged in extensive and continuous negotiations with the FCC, the DOJ and the creditors’ committee. These discussions have explored a variety of possible transaction structures that would result in a consensual resolution of FCC litigation with NextWave, give the creditors a better deal and give Nextel the opportunity to purchase NextWave’s licenses, claimed Nextel. The fact that Nextel cannot publicly comment on these discussions will hamper continued negotiations toward an alternative reorganization plan, Nextel argued.
U.S. Bankruptcy Judge Adlai Hardin, however, ruled that Salmasi’s public statement did not misstate the facts and denied Nextel’s motion. Transcripts of the judge’s ruling were not available by press time.
NextWave argued that Salmasi’s statements were correct because no official deal exists for Nextel to obtain NextWave’s licenses. The licenses are under the jurisdiction of the bankruptcy court, and Nextel and the FCC have acknowledged that no deal, which would require several regulatory approvals, has been completed.
NextWave added that it is discussing alternatives with other third parties and would consider plans superior to the one already approved. Nextel’s plan, said NextWave, is risky since it requires many unprecedented regulatory approvals, including a waiver of the FCC’s designated-entity rules.
NextWave’s Chapter 11 reorganization hearing has been put on indefinite hold because of a ruling from the U.S. Court of Appeals for the Second Circuit. The FCC is protesting the New York U.S. Bankruptcy Court’s jurisdiction over the case. A hearing is set for Nov. 1. The bankruptcy court ruled earlier this year that NextWave is entitled to keep its licenses and reduce its debt to the FCC from $4.7 billion to $1 billion. Since then, the commission has pursued every avenue, including a preliminary deal with Nextel, to stay the case and get the licenses out of NextWave’s hands.
