MobileMedia Corp. announced Motorola Inc. discontinued product shipments to the carrier until it secures the credit to “assure payment of $34 million past due accounts payable.”
The Ridgefield Park, N.J.-based company also said it skipped a $5.6 million interest payment due Dec. 9 in an effort to conserve cash for operations.
The steering committee of MobileMedia’s bank lenders indicated it would recommend that letters of credit be issued to support the obligation to Motorola. The companies have not reached an agreement.
MobileMedia’s missed interest payment is a default under its credit agreement. As previously announced, the company failed to make an interest payment last month on its 9.38 percent senior subordinated notes due November 2007.
Discussions continue between MobileMedia and its vendors, lenders and note holders.
Failure to reach agreements with suppliers and creditors, will likely result in the company filing Chapter 11 bankruptcy, said the company.
MobileMedia says its financial troubles stem chiefly from operational problems associated with integrating MobileMedia and MobileComm.
MobileComm was purchased from BellSouth Corp. for $930 million cash. The deal was completed in January.
