Straight Path secured new funds from investment group as it continues to work on strategic plans backed by portfolio of 5G spectrum assets.
Straight Path Communications, which holds a significant portfolio of millimeter wave spectrum licenses seen as crucial for “5G” technology deployments, said it scored $17.5 million in debt financing in a move it claims expands its options as it continues to explore strategic alternatives.
The new funding was sourced from a group of investors led by current shareholder Clutterbuck Capital Management. The loan is said to be senior secured, with the lenders having initially received approximately 252,000 warrants with a strike price at $34.70.
The investment comes on the heels of Straight Path agreeing to a settlement with the Federal Communications Commission over spectrum license build out requirements. As part of the settlement, Straight Path is paying a $100 million civil penalty to the United States Treasury, surrendering 196 of its spectrum licenses in the 39 GHz band and selling the “remainder of its license portfolio,” with 20% of those proceeds also paid to the Treasury as “an additional civil penalty.”
The settlement fee includes $15 million up front, with the rest coming from the 20% share of sold licenses or an additional $85 million in fines should Straight Path not announce a deal to sell licenses within one year. Straight Path can also return its licenses to the FCC and not pay any additional fine.
The settlement stemmed from an FCC Enforcement Bureau investigation that began with an anonymous source publishing allegations that Straight Path falsified build out claims in obtaining renewal of its 39 GHz spectrum licenses. The FCC said it found equipment in support of the spectrum had only been deployed for a “short period of time at the original transmitter locations and that no equipment was present at the time of this investigation at the majority of the relevant locations.”
Straight Path put a slightly brighter spin on the settlement, noting it comes out of the decision with “the vast majority of its nationwide 39 GHz spectrum fully intact and its 28 GHz spectrum unchanged.” As for the civil penalty, the firm said it will pay the $15 million in installments over a nine-month period.
Specifically, Straight Path said it will continue to have control over 735 licenses, including 175 billion megahertz per potential customer in the 39 GHz band and 39 billion megahertz per pop in the 28 GHz band. The company said it’s returning 93 of its 39 GHz licenses to the FCC.
While stating plans to remain a “leader in the next frontier of telecommunications,” the company said it was also moving on a “review of strategic alternatives to maximize shareholder value,” and had retained investment banking advisory firm Evercore.
Straight Path investors appeared hopeful of the company’s future.
“We are highly encouraged by Straight Path’s recent FCC settlement and its unique position as the most significant holder of newly regulated, commercially available 5G spectrum,” said Robert Clutterbuck, managing partner at Clutterbuck Capital. “We are glad to help finance the company at this critical juncture, and we look forward to seeing the positive developments continue.”
Straight Path management said the investment will allow the company to meet short-term financial obligations as part of the FCC settlement.
“Our obligations over the next 9 months to the FCC are covered, and we can now turn our focus to exploring strategic alternatives for the company in order to maximize shareholder value,” said Straight Path CEO Davidi Jonas.
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