ICO Global is planning to raise US$30m through a rights issue of just under 42.9 million shares at a subscription price of US$0.70 per share. The offer price represents a discount of approximately 41.7% on ICO’s average share price prior to the…
ICO Global is planning to raise US$30m through a rights issue of just under 42.9 million shares at a subscription price of US$0.70 per share. The offer price represents a discount of approximately 41.7% on ICO’s average share price prior to the announcement.
The rights offering, which is not underwritten, is due to begin on February 8, 2010 with an expiration date of March 9. Jefferies, which has also been advising ICO subsidiary DBSD North America on its restructuring process during Chapter 11, is providing financial advice on the issue.
Proceeds from the rights offering are to be used for ongoing operational expenses. ICO added that it may also use a portion of the net proceeds to acquire or invest in complementary businesses, products and technologies, as well as for capital expenditures. Pending these uses, the company expects to invest the net proceeds in short-term, investment-grade securities.
Under the deal, shareholders Eagle River Partners (ERP), Highland Capital Management, Knighthead Master Fund and Caspian Capital Advisors have entered in a standby purchase agreement under which they will purchase any shares of Class A common stock that are not purchased by the company’s other stockholders in the rights offering. The maximum commitments accepted by the standby purchasers are US$17.25m, US$8.5m, US$2.125m and US$2.125m, respectively. ICO founder and former chairman Craig McCaw is the sole manager and beneficial owner of ERP, while ICO chairman and acting CEO Ben Wolff is the president of Eagle River Investments, an affiliate of ERP.
Hedge fund Harbinger Capital Partners, which also owns sizeable stakes in ATC rivals Terrestar and SkyTerra as well as MSS operator Inmarsat, had originally also entered into the standby purchase agreement but terminated the agreement on February 4. ICO stated that “the termination of the standby purchase agreement with Harbinger was made in conjunction with a transfer of Harbinger’s shares in the company, and is unrelated to the company or the rights offering.”
Connected to the rights issue, the ICO board of directors also adopted a Tax Benefits Preservation Plan designed to preserve stockholder value and the value of certain tax assets primarily associated with net operating loss carryforwards (NOLs). The plan was adapted to reduce the likelihood of an unintended “ownership change” occurring from the offering that could in turn affect ICO’s ability to take advantage of its NOLs.
The company stated that it ‘has substantial existing and potential NOLs, and under the Internal Revenue Code and the Treasury Regulations, it may “carry forward” these losses in certain circumstances to offset any current and future income and thus reduce its federal income tax liability, subject to certain restrictions.’
Adding: ‘To the extent that the NOLs do not otherwise become limited, the company believes that it will be able to carry forward a significant amount of NOLs, and therefore these NOLs could be a substantial asset for the company.
ICO chairman and acting chief executive officer Ben Wolff said: “The actions taken by our Board are aimed at achieving two key objectives. First, we have secured commitments for capital that we believe should be adequate to fund our efforts for at least the next two years. Second, we have structured the capital raise and adopted a Tax Benefits Preservation Plan in a manner intended to minimise inadvertent negative impacts on the preservation of our substantial tax losses that could result from significant changes in our stockholder base.”
