What is left of Worldspace (OTC BB: WRSPQ) was granted permission(docket #0962 dated 3/24/2010) on March 24th in a Delaware courtroom to either find a suitor for their satellites, or de-orbit them. Liberty Media (NSDQ: LCAPA, LBTYA) attorney representatives were present when the decision was made. Although the satellites are actually owned by Worldspace Satellite Company Limited (SATCO) a non debtor affiliate of Worldspace, the contingency relief sought by Worldspace in the petition filed on March 16th was accepted, in the event they are unable to sell the satellites off.
One way or another, this issue will come to final resolution soon. The long dragged out Bankruptcy has not done any justice to anyone. Especially not all the former listeners of Worldspace, some of whom were stuck when the service went bottoms up with pre paid services they can no longer use to listen to Worldspace and its content which they once enjoyed. Final decisions yet to be made, let’s hope the final chapter and closure to this situation is quickly upon us and not dragged along even more.
I think this is just a play to get Liberty to remove debt owed by making them buy these birds, instead of just being awarded them.
Nice article Steve. Concise.
Who owns the satellite that is in storage? THX.
Apparently its actually SATCO who physically on paper owns the SATS! I was never aware that was the case until Liberty filed that response on the 17th or 18th of March.
Thanks for getting this out so quickly, Steve…one more step closer to final resolution…hope this case closes soon…
I disagree with your wishes – I hope it drags out as long as possible. I am still listening to NPR Worldwide via WorldSpace Afristar, and a deorbiting of this satellite will not serve me well.
Steve,
any thoughts or indications Liberty will by these birds and use them to expand sirius xm?
tia
@china – that would be far preferable than throwing them away. Especially for me, selfishly, as I don’t want my satellite radio on the southern tip of Africa to go away.
Steve, quick question for you… where did you get your information? Granted I was at the hearing and only have the Order approving the motion that was filed yesterday — so I don’t know for sure. But if you’re basing this on the filing from yesterday — then I don’t necessarily agree with you here.
Not trying to be argumentitive — but the Order is for the de-orbit motion only — it is not for the sale of the assets.
Keep in mind Worldspace’s Motion and Liberty’s response. In the motion, Worldspace asked for 2 forms of relief, either (a) or (b) shown below:
“…(a)(i) approving the proposed plan for de-orbit of the satellites substantially on the terms set forth in the De-Orbit Proposal, (ii) authorizing the Debtors to enter into any necessary transactions or documents in connection with the De-Orbit Proposal, and (iii) authorizing the Debtors to take any additional steps necessary to de-orbit the Satellites, or, in the alternative, (b) authorizing the Debtors (i) to sell the Satellites and assets relating to their operations pursuant to section 363 of the Bankruptcy Code or (ii) to abandon the Satellites and assets relating to their operations pursuant to section 554 of the Bankrutpcy Code.”
However in the actual Order signed by the judge, everything requested from (b) was ommitted. The only thing approved in the actual order is (a):
“…(a)(i) approving the proposed plan for de-orbit of the satellites substantially on the terms set forth in the De-Orbit Proposal, (ii) authorizing the Debtors to enter into any necessary transactions or documents in connection with the De-Orbit Proposal, and (iii) authorizing the Debtors to take any additional steps necessary to de-orbit the Satellites”
Keep in mind, in Liberty’s response to the Motion, they had no problem and did not contest everything in (a); however they contested to the relief listed in (b)… in fact, saying the “…alternative relief request by the Debtors should be denied”.
Without seeing anything in this order that gives approval of (b) — or any mention of a sale, or abandoning the assets — I do not think this order allows it.
Perhaps you got your info elsewhere, in which case I’d love to see it? Regardless, given Liberty’s stance on the relief requested in (b) — I would be surprised to see the judge approve it so easily. I also read the RapidTV story on the approval, and that article states that the judge in “approving the WorldSpace plan, set aside any objections over the contested claim of actual ownership of the two satellites.” The problem here, the order says nothing about setting aside any objections — in fact, there were no objections to that actual relief request… only the alternative relief, which wasn’t mentioned in the order.
See the possible confusion?
http://www.kccllc.net/documents/0812412/0812412100324000000000006.pdf
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@china — The AfriStar satellite is nearing 12 years old, it has a “design life of twelve years, with an orbital maneuver life of 15 years”. In other words, that satellite is nearing time to be decommissioned anyways. It is based on early/mid 1990′s technology. This satellite must be replaced in the coming year. The AsiaStar satellite is also 10 years old and it to has the same design. This satellite needs to be replaced in the next couple years.
This CAPEX is one of the reasons I’ve been very cautious about jumping in with this company so quickly. Replacing these two will run about $600MM on the near term.
Worldspace does have AfriStar 2 (or whatever they’re calling it today). This can likely be upgraded and eventually launched. But the launch and needed insurance will run nearly $100MM too.
This company needs a sugardaddy (like Liberty), but what it doesn’t need is the old unsecured creditors involved who have been running it. I wouldn’t be surprised in the least bit if that is why Liberty is now playing hardball over the failed APA.
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Homer…if you read the original filing….docket #939 it spells out all the options and the de-orbit plan including the words” or in the alternative, authorizing the debtors to sell the satellites……”, in this latest docket…it states the de-orbit proposal is approved…I am not an attorney, but I took that to mean that the contents of the original docket request in its entirety were approved. It clearly shows reference to docket# 939 in this latest filing. I am glad to see your response here as I know you bring tremendous knowledge to the table…please let me know if you see things differently, as I value your interpretation of the events. Thanks again.
@asm610
Again, you have to read the “relief requested” in the Motion… then the relief granted in the Order. It cuts off before the “alternative relief” is mentioned. In fact, in the order it spells out all of the elements of relief that are stated in option (a) individually… but says none of the elements of from relief (b).
The motion specifically requested relief to de-orbit the satellite… or an alternative (not both). The Court granted the original motion, not the alternative, because it was uncontested. The alternative relief also quoted different regs, which weren’t even mentioned in the Order.
With that in mind, Liberty did not object to the sale outright — just wanted to make sure the assets were sold through the bankruptcy court, via a Trustee of the Court — not by the company.
I’m prett firm on this one, FWIW.
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Ok Homer…so I take that to mean…the Sats will be sold, and not de-orbited…and that the sale will not be in WORDLSPACE’s control…is that what you are saying?
@asm610
Hmmm, that was my original thought – but I don’t know anymore, given their age and the condition of the company. Keep in mind, the satellites are pretty much worthless without licenses. And Worldspace is the only one with a few licenses for that portion of the L-Band. By the time anyone would get a license for somewhere, the satellite(s) would pretty much be done. They’re on their way out as it is.
Let’s look at the big picture…
Worldspace went bankrupt and they took into bankruptcy, most of the assets accept the subsidiary that owns the satellites. They attempt Asset Purchase Agreement between Worldspace and Yenura (which is the CEO’s own company based in Singapore), but they default on the payements and the APA subsequently falls through.
Liberty then steps in last year, buying up their debt claims, becomes their DIP finanicier and then works on a APA with Worldspace and its largest shareholder (Yenura, an unsecured claimant). At the last minute, according to Worldspace, Liberty pulls out of the deal — with Worldspace making all kinds of accusations about it. While claiming they need to de-orbit the satellites or sell them. Liberty responds saying, they’re not their satellites to sell or abandon; any sale must go through the court, via a court appointed trustee. But if they want to de-orbit them, go ahead… and also says many of the claims made by Worldspace about Liberty and the APA are false — but they wouldn’t go into them at that point.
So the hearing goes through, the Judge signs off on the uncontested de-orbit… now Worldspace can de-orbit them, but IMHO, they cannot sell them.
Let’s go back to what we know… we know the satellites are coming up on 12 and 10 years old, respectively. We know they have 12 useful lifespans — and 15 year orbital maneuver lifespans. That puts one in the crosshairs that it must be replaced now; and the other sooner, rather than later.
Perhaps Liberty is saying, go ahead – we didn’t want them any how… they need to be replaced. Because by the time this thing gets out of BK Court and they re-establish the company and go for a relaunch… it will easily be next year, and Afristar will by 13 years old; and Asiastar is right behind it.
I just don’t know how much value there is to these satellites. In hindsight, de-orbitting them now and relaunching the company with new birds will be the best thing? Sirius and XM can’t use them.
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Homer,
I can agree with pretty much everything you say..except I don’t see how WORLDSPACE re launches. I think they are dead and buried. I also wonder whether Liberty just wants those licenses..and the SAT in storage. That would be the best option and most cost effective for them. One more powerful Sat covering more of Westen Europe, and the Sirius XM SATS could take care of any possibilities in South America for now. Different areas….different platforms….Once there is more viable growth….in either region more infrastructure is launched? Any thoughts
@asm610
Sorry if this is out of order, apparently I can’t reply directly to your post…
I should have said that I think the “worldspace” entity is DOA. It will likely be Liberty Satellite Radio, or something like that. That will be the re-launch.
Western Europe would be key, the GEO satellites can cover most of it… but will have a harder time reaching the higher elevations of northern europe. An HEO constellation would be better, but that’s a different topic. The other problem is the UK… the UK already sold off the L-Band to Qualcomm Inc, who is offering mobile tv on it. Worldspace is SOL there, unless they can work a deal with Qualcomm.
S. America? To be honest, I’m not sure of the allocation, but I believe the only area’s that have S-Band allocation is North America, Japan and S.Korea… the rest of the world uses L-Band. The Sirius/XM satellites would be worthless there. Furthermore, their beams are pointed at North America. It would take different satellites with more transponders and spotbeams to get into S.America too.
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@asm610
One other thing that may help you digest, or at least see how/why I came to my conclusion. First, here is the word-for-word relief that was requested by Worldspace by the Motion, which I split up into sections to highlight each one:
~~~~~~~~~~~~~~~~~~~~~~~~~~~
Relief Requested
23. By this Motion, the Debtors request that the Court enter an order in the proposed form attached as Exhibit A hereto (the “Order”), pursuant to sections 105, 363 and 554 of the Bankruptcy Code and Bankruptcy Rules 2002(a)(2), 6004 and 9014,
(a)
(i) approving the proposed plan for de-orbit of the Satellites substantially on the terms set forth in the De-Orbit Proposal,
(ii) authorizing the Debtors to enter into any necessary transactions or documents in connection with the De-Orbit Proposal, and
(iii) authorizing the Debtors to take any additional steps necessary to de-orbit the Satellites,
or, in the alternative,
(b) authorizing the Debtors
(i) to sell the Satellites and assets relating to their operations pursuant to section 363 of the Bankruptcy Code or
(ii) to abandon the Satellites and assets relating to their operations pursuant to section 554 of the Bankruptcy Code.
~~~~~~~~~~~~~~~~~~~~~~~~~~~
Now here is the exact order taken from Page 2 of the order, signed off by the judge. I also split up the different elements into sections, so you can see what approved exactly. You can see that the “alternative” relief is not included or mentioned.
~~~~~~~~~~~~~~~~~~~~~~~~~~~
IT IS HEREBY ORDERED THAT:
1. The Motion is GRANTED.
2. The Debtors are authorized, pursuant to section 363 of the Bankruptcy Code, to de-orbit the Satellites and to take any additional steps necessary in connection
therewith.
3. The De-Orbit Proposal is hereby approved and all transactions and documents in connection therewith are hereby authorized.
4. Notwithstanding the possible applicability of Bankruptcy Rule 6004(h) or any other provision of the Bankruptcy Rules or the Bankruptcy Code, the terms and conditions of this Order shall be immediately effective and enforceable upon its entry.
5. In the event of a conflict between the terms of the Motion and this Order, this Order shall control.
6. The Debtors are authorized and empowered to take all actions necessary to implement the relief granted in this Order.
7. This Court shall retain jurisdiction to hear and determine all matters arising from or related to the implementation of this Order.
————
Homer,
Contents of section 363..US Bankruptcy code….It again appears that sale of assets was also a part of the motion..but with very strict parameters and under control of the court….as you said.
The Section 363 Sale. As a reminder, a bankruptcy asset sale often happens in the first few weeks or months of a Chapter 11 case, rather than as part of a plan of reorganization. Frequently this will involve a sale of all or substantially all of a debtor’s business as a going concern. The sale is generally referred to as a “Section 363 sale” because Section 363 is the key Bankruptcy Code section that governs a debtor’s sale of assets in bankruptcy. The debtor must seek bankruptcy court approval of a sale that is not in the ordinary course of business and of any effort to transfer executory contracts, intellectual property licenses, or commercial real estate leases to the buyer.
Sale Motion Requirements. The new local rule first addresses motions to sell property of the estate. A copy of the proposed or near-final purchase agreement must be attached to the motion, as well as a proposed sale order, and any request for a consumer privacy ombudsman under Section 332 of the Bankruptcy Code must be included. The most interesting changes, however, are in the list of provisions which, if included in the motion or sale order, must be highlighted together with a justification for each such provision. These include the following:
•Sale to insiders
•Agreements with management
•Releases
•Private sale or no competitive bidding
•Closing and other deadlines
•Good faith deposit
•Interim agreements with proposed buyer
•Use of sale proceeds
•Section 1146 tax exemption
•Retention of records
•Sale of avoidance actions
•Successor liability findings requested
•Sale free and clear of leases or licenses
•Credit bid
•Waiver of 10-day stay under Rule 6004(h)
A Few Specifics. To get a sense of the changes made, here’s what the amended rule now requires for disclosure of agreements with management included as part of a sale motion:
Agreements with Management. If a proposed buyer has discussed or entered into any agreements with management or key employees regarding compensation or future employment, the Sale Motion must disclose (a) the material terms of any such agreements, and (b) what measures have been taken to ensure the fairness of the sale and the proposed transaction in the light of any such agreements.
Good dialogue ASM/Homer. I’ve been swamped, but this weekend I will try to get back into the Sat Tech Forum I created on KOAT. I am still stuck on page 4 of recent SXM 10K that mentions the “sixth” sat … I mean let’s seriously look at XM5, FM5 and FM6. Why didn’t the 10K call out FM6 by name instead of labeling it as “sixth” sat? If SXM is converting to strictly GEO system, and switches out repeaters … could they manage using only XM5 and FM5??? Also LCC is alive and kicking again, and has the resources to get repeaters switched out in short order. I seriously have a belief that FM6 (or the “sixth”) scheduled now in late 2011 is not planned to be produced for the SXM constellation. Again, why didn’t the 10K call out FM6 by name instead of “sixth”?
Sidebar: Homer, didn’t I see you mention awhile ago FM7? I cannot find this but thought you did say something on this at some point in the past. Sure would love to see you join us in KOAT, even if just in the Sat Tech Forum I started. We can capture all of this sat stuff plus licensing, global expansion and regulatory matters. What say you?!?
FINALLY, back to LCC … did anyone notice that recent client demand has LCC focused on Asia Pacific, Latin America and parts of Africa?
Of course, I could be reading into all of this wrong (laffs), but the sats got me (over)thinking, and I have the impression that the 10K wording (or lack thereof) on the Sirius side is the key to a puzzle.
@smokysongs
Thanks smokey, I’ll take it into consideration.
As for the satellites, the Sirius FM-7 was known because Sirius reserved a launch for it — and stated that FM-6 would replace one of the current satellites; the plan was to replace 2 of the 3, plus use the FM-5 in that “altered constellation”. FM-7 would be the final one.
But then we learn that FM-6 is not going up into the HEO orbit, but going into GEO like FM-5. That tells me that they’re going to change the constellation altogether and use FM-5 and FM-6 from a GEO orbit; while XM uses XM-3 and XM-4… and the soon to be launched XM-5 will become the in-orbit spare for all 4 satellites. It’s a very smart and redundant move for the two companies, IMHO. Will save them over $600MM in synergies via using the same constellations.
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Great dialogue between Steve and Homer. It seems to me that it would be quite expensive for Worldspace to de-orbit the satellites; esp,. if they don’t have any real value? Any idea about the cost and whether Worldspace even has the funds to make this happen?
Boomer,
According to their petition..they state that they do have the funds to de orbit.
Just read the following from a post by Homer on another message board,
“In addition to the Debtors’ operating expenses during the course of the deorbiting project and any other extraordinary costs, the projected cost of the de-orbiting process would be approximately $84,000. The Debtors have sufficient funds to cover this expense.”
I’m surprised at the low cost…
@Boomer
Go to page 20 at this link, to see the de-orbit price quote from Intelsat. Worldspace attached it to the Emergency Motion.
http://www.kccllc.net/documents/0812412/0812412100316000000000002.pdf
I originally made the mistake of looking at the price like a financial statement, where $$’s are measured in the $1,000′s… so I thought it originally was $84MM. But after a couple days thinking about it — I realized that that was a bit pricey… and went back and saw the last page of the motion, with the price quote… then promptly kicked myself in the butt.
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Homer,
Possible sale was included in the approved motion as per reference of BK section 363 and Bankruptcy rule 6004:
Rule 6004:
Rule 6004. Use, Sale, or Lease of Property
•(a) Notice of proposed use, sale, or lease of property.
Notice of a proposed use, sale, or lease of property, other than cash collateral, not in the ordinary course of business shall be given pursuant to Rule 2002(a)(2), (c)(1), (i), and (k) and, if applicable, in accordance with § 363(b)(2) of the Code.
•(b) Objection to Proposal.
Except as provided in subdivisions (c) and (d) of this rule, an objection to a proposed use, sale, or lease of property shall be filed and served not less than five days before the date set for the proposed action or within the time fixed by the court. An objection to the proposed use, sale, or lease of property is governed by Rule 9014.
•(c) Sale Free and Clear of Liens and Other Interests.
A motion for authority to sell property free and clear of liens or other interests shall be made in accordance with Rule 9014 and shall be served on the parties who have liens or other interests in the property to be sold. The notice required by subdivision (a) of this rule shall include the date of the hearing on the motion and the time within which objections may be filed and served on the debtor in possession or trustee.
•(d) Sale of Property Under $2,500.
Notwithstanding subdivision (a) of this rule, when all of the nonexempt property of the estate has an aggregate gross value less than $2,500, it shall be sufficient to give a general notice of intent to sell such property other than in the ordinary course of business to all creditors, indenture trustees, committees appointed or elected pursuant to the Code, the United States trustee and other persons as the court may direct. An objection to any such sale may be filed and served by a party in interest within 15 days of the mailing of the notice, or within the time fixed by the court. An objection is governed by Rule 9014.
•(e) Hearing.
If a timely objection is made pursuant to subdivision (b) or (d) of this rule, the date of the hearing thereon may be set in the notice given pursuant to subdivision (a) of this rule.
•(f) Conduct of Sale Not in the Ordinary Course of Business.
•(1) Public or Private Sale.
All sales not in the ordinary course of business may be by private sale or by public auction. Unless it is impracticable, an itemized statement of the property sold, the name of each purchaser, and the price received for each item or lot or for the property as a whole if sold in bulk shall be filed on completion of a sale. If the property is sold by an auctioneer, the auctioneer shall file the statement, transmit a copy thereof to the United States trustee, and furnish a copy to the trustee, debtor in possession, or chapter 13 debtor. If the property is not sold by an auctioneer, the trustee, debtor in possession, or chapter 13 debtor shall file the statement and transmit a copy thereof to the United States trustee.
•(2) Execution of Instruments.
After a sale in accordance with this rule the debtor, the trustee, or debtor in possession, as the case may be, shall execute any instrument necessary or ordered by the court to effectuate the transfer to the purchaser.
•(g) Sale of Personally Identifiable Information.
•(1) Motion.
A motion for authority to sell or lease personally identifiable information under § 363(b)(1)(B) shall include a request for an order directing the United States trustee to appoint a consumer privacy ombudsman under § 332. Rule 9014 governs the motion which shall be served on: any committee elected under § 705 or appointed under § 1102 of the Code, or if the case is a chapter 11 reorganization case and no committee of unsecured creditors has been appointed under § 1102, on the creditors included on the list of creditors filed under Rule 1007(d); and on such other entities as the court may direct. The motion shall be transmitted to the United States trustee.
•(2) Appointment.
If a consumer privacy ombudsman is appointed under § 332, no later than 5 days before the hearing on the motion under § 363(b)(1)(B), the United States trustee shall file a notice of the appointment, including the name and address of the person appointed. The United States trustee’s notice shall be accompanied by a verified statement of the person appointed setting forth the person’s connections with the debtor, creditors, any other party in interest, their respective attorneys and accountants, the United States trustee, or any person employed in the office of the United States trustee.
•(h) Stay of Order Authorizing Use, Sale, or Lease of Property.
An order authorizing the use, sale, or lease of property other than cash collateral is stayed until the expiration of 10 days after entry of the order, unless the court orders otherwise
Amazing dialogue Gents, good stuff. One point to note is that the FCC license that WS and LM have an interest in is limited to an exact replacement of the Afristar1 satellite – EIRP levels, beam coverages, frequencies. Therefore the use of Afristar2 (if it ever could be refurbished and launched) is expressly limited by the FCC license to the minor coverage over Italy with small amounts of frequency and inadequate power. The license WS were hoping to use in Europe is called “Musicaa” and was filed by the French administration and assigned to WS in years past. However, last year the French administration withdrew that application on behalf of WS, and assigned it to another entity. Therefore, WS (and Liberty) have no filing/license option for a “high power GEO” satellite over Europe. So, any effort to put a new satellite up would either require the French to allow reassignment – extremely unlikely, or WS would have to file anew WITH A NEW ADMINISTRATION and go in the back of a very long queue (OFCOM estimates 120 applicants). Higher in priority are the Dutch filings for ONDAS Media for example. WS would be required to protect all other filings from interference. In adddition, they could not interfere with terrestrial assignments in the L-band.
Last, it is not correct that WS have any existing terrestrial licenses for L-band in Germany, Switzerland and Italy – all retracted them. And others do have license rights, such as Qualcomm in the UK, and ONDAS Media in Spain, Holland, and Italy.
The Europe play for L-band satellite radio for WS and LM is a dead end street. I think its highly likely that by now Liberty know the full facts.
Best,
Roger,
I can only go by what I see..and on the asset list from the original sale which fell through I see the following…
SECTION 4.13. Communication Licenses. Sellers have filed with the FCC, the
ACMA, the ART and the ITU all reports, documents, instruments, information and applications
required to be filed pursuant to the rules and regulations of the FCC, the ACMA, the ART and
the ITU to the extent relating to the Acquired Assets, except where the failure to so file would
not have a Material Adverse Effect. The Communication Licenses set forth in Schedule 4.13 of
the Disclosure Schedule (the “WorldSpace Licenses”) are held by Sellers and, except as
disclosed in the SEC Documents or as would not have a Material Adverse Effect, the
WorldSpace Licenses are in full force and effect and, to the Knowledge of Sellers, there are no
pending modification, amendment or revocation proceedings in relation to the WorldSpace
Licenses initiated by the FCC, the ACMA, the ART and the ITU or any equivalent authority in
any other jurisdiction in which Sellers operate which, if determined against Sellers, would have a
Material Adverse Effect; to the Knowledge of Sellers, except as set forth on Schedule 4.13 of the
Disclosure Schedule, fees due and payable to domestic and foreign governmental authorities
pursuant to the rules governing WorldSpace Licenses held by Sellers, the nonpayment of which,
with the giving of notice or the lapse of time or both would constitute grounds for revocation
thereof, have been timely paid, except as would not have a Material Adverse Effect.
SO unless I see a filing…which I don’t…that tells me anything different, or a link with this information from you, I have to stick with what I have proof of.
Swiss repeater license #2301467, issued March 13, 2008, from OFCOM, Office Fédéral de la
Communication (address: Office Fédéral de la Communication, Service mobiles et par satellite,
Case postale, 2501 Bienne, Switzerland).
This was issued to WRSP in 2008…I see no retraction of same.
Roger, curious your insight … what do you make of Afristar 3 scheduled to launch next Spring. Link:
http://www.satelliteonthenet.co.uk/index.php/2011
Of course, assuming the accuracy of the Website.
Actually, next February 2011, less than 12 months away.
Smokey,
I’ve given many inputs to these types of launch tracking folks, including the FAA which updates annually. They are only as accurate as the inputs, which are routinely skewed by the companies who have a vested interest. For example, if Arianespace want to show a full launch manifest they include optional launches or even paper projects that have no funding. I would bet a dozen donuts that WS inputs date back to their IPO! If you talk to Thales, the manufacturer of Afristar2, they will tell you that the Afristar2 satellite is not capable of being readied for launch in that window, if at all. To my knowledge there is no Afristar3 in construction although the designator for this launch manifest may be in error. What’s worse about Afristar2 is that it is the same heritage as the previous birds which is horribly outdated.
Roger, thank you for insight. I had extensive meetings with Thales procurement and RF eng heads in Cedex France last summer … but it was related to French military satcom projects.