WESTBOROUGH, Mass.—Arch Wireless Inc. said it will file for file for Chapter 11 bankruptcy by Jan. 15 in order to restructure its long-term debt. The company owes about $2 billion.
The move comes as little surprise as Arch has made numerous hints at bankruptcy in releases and Securities and Exchange Commission filings during the past several months. Additionally, the bankruptcy announcement comes just a few days before Arch’s deadline to respond to an involuntary bankruptcy move by some of the company’s Senior Notes holders, which was filed Nov. 9.
Arch said an agreement with its secured creditors will form the basis for its reorganization plan. Under the deal, Arch Wireless will issue equity and Arch Wireless Holdings Inc., its operating subsidiary, will issue $200 million principal amount of 10 percent Senior Secured Notes due 2007 and $100 million principal amount of 12 percent Senior Subordinated Secured PIK Notes due 2009 in exchange for all existing debt and equity.
Arch said it received $50 million in debtor-in-possession financing from a group of banks led by TD Securities (USA) Inc. This, added to the $50 million the company has on hand, will help it fund its operations through the bankruptcy proceeding.
“We are very pleased to receive the support of Arch’s secured creditors. Our agreement with them is critical to completing the restructuring process expeditiously. This agreement and our Chapter 11 filing are important, necessary and prudent first steps for Arch to recapitalize the company, improve our financial condition and create the opportunity for long-term growth,” said C. Edward Baker Jr., Arch’s chairman and chief executive officer. “In time we expect to emerge as a financially sound and stable operating entity and continue to pursue opportunities in the growing market for two-way messaging and wireless mobile data.”
Arch’s announcement is the latest in a series of major moves within the paging and messaging industry. The industry’s major nationwide carriers have been suffering from declining numbers of one-way customers and slow two-way device sales, and the nation’s No. 4 carrier WebLink Wireless Inc. was forced into bankruptcy in May. Also in May, the industry’s main infrastructure supplier, Glenayre Technologies Inc., announced it would exit the business. And just this week Motorola Inc., the major supplier of one- and two-way paging devices, announced it would quit the business early next year.
