OrbComm Files for Voluntary Chapter 11 Protection
Satellite-based global data communications company OrbComm Global LP this afternoon said it and seven of its subsidiaries filed for Chapter 11 bankruptcy but expected its satellite network meanwhile would remain in full operation. The Dulles, Va., company said it took the action as part of its efforts to restructure and reorganize its business.
Scott Webster, chairman and chief executive officer of OrbComm, told Washtech.com that the company has been in discussions with an informal bondholders committee, representing more than 60 percent of the outstanding principal amount of OrbComm's senior notes. Webster also said no other layoffs are planned as part of OrbComm's new business and operating plans.
OrbComm said it has retained Donaldson, Lufkin and Jenrette Securities Corp. to advise the company on various recapitalization alternatives and assist in discussions with its bondholders. OrbComm said it expects to continue discussions with representatives of the bondholders while the company is in Chapter 11.
One month ago, OrbComm announced that it was unable to make an interest payment due on its bonds. The payment was due on the company's $170 million in senior notes, which are scheduled to mature in 2004.
In addition, OrbComm said Dulles-based Orbital Sciences Corp. [NYSE:ORB] has retained Bear, Stearns and Co. Inc. to explore financing alternatives for OrbComm.
Webster said filing for Chapter 11 was a necessary step in the company's restructuring plan, allowing it time to secure the financial resources needed to continue to serve its customers. Webster said he was encouraged by the continued support and commitment of the company's key international licensees, value-added resellers and subscriber communicator manufacturers, who were aware of OrbComm's situation and plans.
OrbComm said it is committed to maintaining and operating its network of low-Earth orbit (LEO) satellites and related ground facilities while it restructures its operations.
Under the restructuring, OrbComm said an affiliate of Canadian company Teleglobe Inc. [NYSE:TGO] has agreed to extend to OrbComm a total of $17 million in interim debt financing as previously announced, $8 million of which has already been provided through a secured loan. The balance of this financing will provide the company with short-term liquidity for the next few months and should be provided as debtor-in-possession financing, OrbComm said.
Webster said the move positions the company as a more attractive investment as it works to restructure debt to equity. OrbComm's owners and partners, Teleglobe and Orbital, have indicated that they are prepared to convert their outstanding debt into equity in OrbComm in connection with the completion of new equity investment, OrbComm added.
OrbComm said it expects that the restructuring, coupled with the financial stability it hopes to achieve during the Chapter 11 process, will enable the company to address the current challenges and "emerge from Chapter 11 as quickly as possible." OrbComm said it believes the measures will put the company in a position to continue to capitalize on the fast-growing international market for satellite-based global data communications.
OrbComm also said it has implemented a new business plan that involves reduced operating and capital expenditures and a simplified distribution strategy that focuses on its top-tier customers in key vertical markets and the distribution of its services through indirect sales channels, including its value-added resellers and international licensees.
In August, OrbComm announced that it was revising its sales and marketing strategy in light of lower than expected subscriber ramp-up and revenues. Under the new strategy, the company said it would focus on its top-tier customers in a number of key industries and distribute its services through value-added resellers and other partners, rather than through both direct and indirect sales channels. In connection with the implementation of that new strategy, OrbComm said it had reduced its US-based staff by approximately 100 employees.
At the time, OrbComm also said it was exploring a variety of financing alternatives, including selling various assets and restructuring or reorganizing its outstanding debt as well as its business.
At the end of June, OrbComm announced a staff reduction of 112 employees to cut costs. That move came two weeks after OrbComm announced that it had hired New York City-based investment banker Bear Stearns to search for new funding sources and partners.
OrbComm offers two-way monitoring, tracking and messaging services through a commercial satellite-based data communication system that, among other things, tracks trailers, containers and locomotives. It follows failed satellite service providers Washington, D.C.-based Iridium LLC and ICO Global Communications, two huge LEO voice services companies, who also fell into bankruptcy.
Mobile Satellite News