BALTIMORE-Following a creditors’ meeting held May 7 in Baltimore regarding Pocket Communications Inc.’s Chapter 11 reorganization, National Telecom PCS Inc. filed a brief with the court trustee May 21 that advocates Pocket’s immediate move to Chapter 7 liquidation.
NatTel, which has cases against Pocket as a whole pending at the Federal Communications Commission and has filed antitrust litigation against some Pocket individuals in a separate court, claimed Pocket’s bankruptcy action was filed “in bad faith and for improper purposes. Moreover, the fact that Pocket is a `single asset’ debtor (wireless telecommunications licenses), has no revenues, no operations, no cash flow, no `going-concern’ value, less than $600,000 in cash in the bank, is already administratively insolvent and has $2.8 billion in potential liabilities, means that clearly there is absolutely no hope whatsoever that Pocket can be rehabilitated and that any attempt at reorganization is totally futile.”
If the court trustee could force the issue, NatTel contended that much of the $600,000 Pocket swore it had in the bank could be preserved to pay Chapter 7 administrative expenses and that some creditors could be reimbursed.
According to NatTel, once a Chapter 7 trustee took possession of Pocket’s remaining cash and its C-block PCS licenses, it could then decide when and how to auction those markets. “There is great interest throughout the PCS industry for such an auction because Pocket’s licenses are very valuable (though probably not worth the $1.43 billion that was paid by Pocket in the auction),” NatTel wrote. “An auction of Pocket’s licenses in Chapter 7 will generate substantially greater returns for creditors, in cash, than if Pocket continues to languish in Chapter 11 with no hope of reorganization in the future. In fact, if the case is immediately converted, there conceivably could be an auction before the end of summer 1997.”
And if Pocket is successful in finding a white knight to bail it out, such financing would only temporarily “postpone the inevitable,” NatTel concluded. “The acquisition of debtor-in-possession financing is actually adverse to the interests of the estate and creditors because all it will result in is Pocket wasting more time and spending more money in an attempt to propose a plan where creditors receive equity in a company that will still have a billion-dollar antitrust suit pending against it, will therefore be incapable of completing an initial public offering and may not have any FCC licenses anyway if NatTel’s petition to deny is granted.”
At the May 7 creditors’ meeting, Pocket’s counsel and several staff members gave sworn answers to questions from the gathering, but most of those answers were vague and contentious. Lead bankruptcy attorney Paul Nussbaum of Whiteford, Taylor & Preston in Baltimore, explained that Pocket had filed for reorganization based on “financial and tactical issues,” that the company was “running out of cash and had no prospects for more,” that there had been three financial defaults and that Pocket “felt Chapter 11 would protect all creditors.”
Nussbaum refused to go into detail on legal and financial issues that were being discussed at Pocket headquarters. He confirmed that “little activity” besides the reorganization was taking place, that staff had been reduced to 28 “essential” members and that meetings were ongoing with certain of its major creditors and investors. Pocket officials also had been meeting with the FCC “regarding settlement.” All construction on Pocket’s personal communications services markets in Las Vegas and Honolulu has been put on hold.
With only $600,000 left in the bank, Nussbaum estimated a mid-June shutdown if new financing could not be gathered; most of that cash is earmarked for salaries and benefits, and he said principals Daniel and Janice Riker had taken a 25-percent cut in pay.
The company, however, had hired a reorganization specialist, Mark Feldman, for $300,000 per year ($50,000 upfront) plus bonus, severance package and benefits, who probably will be sworn in as an Pocket officer. Feldman’s background includes five years of work managing bankruptcies, and participation in creditors’ and debtors’ committees. Feldman said he consults with the Rikers daily, but that they “are not actively involved in the reorganization case.” Rather, they are involved in “strategy and financing.” Feldman would not divulge any ongoing reorganization progress, saying “we will file a plan at the appropriate time, including the amount of cash we will need.”
The Rikers themselves were not present at the meeting. Creditors were told they were on the road constantly, looking for more financing. Nussbaum said that meetings with “third parties” on the domestic and international front were gleaning some “very interested” international groups, which he declined to identify.
