WASHINGTON-San Juan, Puerto Rico-based PCS 2000 L.P. says it is running out of cash. The company, whose 15 C-block personal communications services licenses are in limbo due to an ongoing Federal Communications Commission investigation and the three petitions to deny filed against it, has issued a capital call to limited partners in hopes of raising more than $13 million.
In a Sept. 30 letter, Javier Lamoso, president of general partner SuperTel Communications Corp., told investors that while the company is moving forward in its plans to become a leading PCS provider, “the legal fees … have been staggering. As a result, we find it necessary to issue the enclosed capital call to the limited partners to ensure that the partnership’s expenses can be met in a timely fashion.”
Limited partners are being asked to buy additional one-fifth equity units in PCS 2000 for $5,000 each. The private placement is being administered by Morgan, Lewis & Bockius L.L.P. of Washington, D.C., which also serves as counsel to SuperTel. Although there is no obligation to participate in this funding call, Lamoso explained that “not contributing will cause some dilution to your percentage interest in the partnership. Those interests not subscribed will be available to the other limited partners.” The initial subscription period ends Nov. 15.
According to the confidential subscription agreement included with the Lamoso letter and obtained by RCR, the new unregistered securities can be held in the subscriber’s name only, and they cannot be transferred or resold. Only “accredited investors”-those with a net worth of $1 million and/or annual individual incomes of $200,000 or joint $300,000 incomes-for the last two years will be allowed to participate; corporations or partnerships must have total assets that exceed $5 million.
Some PCS 2000 limited partners, speaking on the condition of anonymity, said they are continuing to evaluate the document and will have it reviewed by counsel before making a commitment. Most will wait until after Nov. 1 or even until after the presidential election.
The company currently lists adjusted assets, as of June 30, of $70.6 million, most of which is on deposit at the FCC for its pending PCS licenses. Cash and cash equivalents total $14 million. PCS 2000 has been trying to get approximately $15 million of its $50 million C-block earnest money back from the FCC following a $34.5 million credit for the down payment on its C-block licenses.
PCS 2000 has no day-to-day staff expenses; however, it does pay SuperTel’s chief executive officer Richard Reiss $6,000 per month plus $1,000 per day (after three days) for each day he travels on behalf of SuperTel and $2,000 per day for each holiday or weekend day he travels. Reiss also is reimbursed for any SuperTel expenses incurred.
The subscription document also gave details regarding the FCC’s investigation into PCS 2000’s bidding error on the C-block Norfolk, Va., market that occurred Jan. 23. According to Price Waterhouse L.L.P., which investigated the matter for SuperTel, former Unicom (SuperTel’s predecessor) acting chief executive officer and PCS 2000 board member Anthony Easton, who allegedly made the bid that could cost the partnership up to $92.4 million in penalties, “took affirmative steps to conceal his possible responsibility for the mistake,” and that no other person was involved. Another bid withdrawal, this time on the Omaha, Neb., market, could cost the group $1.25 million.
