A new chief executive and reinstated supply contracts have cast a positive light on MobileMedia Corp.’s bankruptcy restructuring. Prudential Securities sees the Chapter 11 filing as positive for the industry and expects the company may put itself up for sale.
Glenayre Electronics Inc., Motorola Inc., NEC Corp. and Panasonic entered into agreements with MobileMedia after the bankruptcy court approved the New Jersey carrier’s request to pay the pre-petition claims of each of the key suppliers.
By securing these contracts, Ridgefield, N.J.-based MobileMedia has met one condition of a $200 million debtor-in-possession loan agreement with Chase Manhattan Bank of New York, and can borrow up to $70 million under that DiP facility. To date, the carrier has used $48 million from that amount “to pay the key suppliers, among other things,” said the company.
In a January report by the telecommunications services group of New York-based Prudential, the firm says, “We believe the filing begins to lift the cloud over the industry.”
The firm states, “a $200 million life-support loan, as opposed to a war chest,” will enable MobileMedia to keep its subscriber base stable, regain 25 percent profit levels, and improve operations.
“We suspect the board will want to sell this asset to an outside strategic telecom provider, or merge it with other suitable paging companies,” said Prudential. “The latter would be preferable for the industry, although an outside strategic buyer would likely be a national telecom provider and signal demand for national messaging assets.”
Former GTE Corp. executive Ronald Grawert also was named chief executive officer at MobileMedia. (See story on Page 26).
A court hearing for final approval of the DiP facility is scheduled Feb. 19. Assuming approval is granted, the company will gain access to another $30 million of the DiP funds, for a total of $100 million. If MobileMedia submits a business plan by April 15, which is approved by the banks’ financial adviser, the remaining $100 million in DiP financing will be available by May.
Prudential predicts that MobileMedia’s fourth quarter results will show about $20 million to $30 million in cash flow and a decline in total subscribers, as ceased shipments of Motorola pagers made it difficult to compensate for churn.
But the new $200 million credit facility could allow MobileMedia to improve on gross subscriber additions during the first quarter and help protect its retail distribution channel, reported Prudential.
