WASHINGTON-After being hit with loan-repayment defaults by the top two C-block personal communications services licensees March 31, LCC International Inc. has decided to “reserve with respect to 1996 earnings $30.1 million, pre-tax, against certain receivables from, investments in and costs associated with Pocket Communications Inc. and NextWave Telecom Inc.”
The McLean, Va.-based radio frequency-engineering and network-design firm stands to lose $1.31 per share for the fourth-quarter 1996 and a net loss per share of $1.19 for the entire year. LCC is delaying filing its annual 10-K with the Securities and Exchange Commission for 15 days while it sorts out the damage. The company also estimated that its net 1997 and 1998 income would be reduced as well.
Before filing for bankruptcy March 31, Pocket defaulted on an interest payment related to a $6.5 million convertible debenture; it also missed a principal and interest payment owed to LCC on a $900,000 note agreement. Overall, Pocket owes LCC $9.6 million. On the same day, NextWave defaulted on a principal-and-interest payment to LCC, but the two companies are discussing a new repayment plan. NextWave owes LCC $20.5 million.
“We intend to meet our obligations past and present, and we are continuing to discuss terms with LCC,” said NextWave spokeswoman Jennifer Walsh, who also commented that this situation was specific only to LCC and that no financial problems exist with other NextWave vendors.
As a result of these defaults, LCC no longer will work with Pocket, ceasing all network buildout activity and re-deploying personnel to other projects. Work with NextWave will continue on a pay-as-you-go plan.
In a written statement, LCC President and Chief Executive Officer Piyush Sodha said, “Our core business remains well-positioned to prosper from the tremendous growth opportunities in the industry. Despite these events, our fundamentals remain strong, our customer base is solid and our growth-rate objectives are on track.” Sodha also said that despite projected losses during this and next year, “the company expects to report an increase in operating profits in both the third and fourth quarters of 1997. The strong demand for our services has enabled us to quickly put in place re-deployment plans, which allow us to achieve a year-over-year increase in operating results.”
LCC probably will be sitting in on the formation of a creditors’ committee this Wednesday regarding Pocket’s recent Chapter 11 filing in Baltimore. In a hearing last week, Pocket asked the court to approve its choice of bankruptcy representation and the continuation of its pre-bankruptcy payroll that, for the remaining Pocket personnel, totals approximately $400,000 per month. In a document filed with the court during the hearing, Pocket also attested that it only had $1 million in the bank.
To begin the belt-tightening process, Pocket has cut its staff down to 34. However, while the company continues to battle for its life, and its assets remain untouchable during the Chapter 11 period, its chief operating officer will continue to collect $7,692 every two weeks; its chief technology officer receives $6,030 bi-weekly; its chief marketer $5,769; its general counsel $6,174; and its chief financial officer $6,154. Chairman and CEO Dan Riker will retain his $4,904 bi-weekly paycheck; President Janice Riker will keep $4,615; and vice president of corporate & financial communications Kevin Inda gets $3,654 every two weeks.
During the hearing, counsel for one of Pocket’s investors, Pacific Eagle Investments, reportedly objected not only to the high salaries that will continue to be paid but to allegations that his company along with other investors forced Pocket into bankruptcy.
