US rural wireless broadband provider Open Range has filed for Chapter 11 bankruptcy protection after failing to get its broadband business off the ground.
In a declaration filed with the bankruptcy court of Wilmington, Delaware, CFO Chris Edwards said…
US rural wireless broadband provider Open Range has filed for Chapter 11 bankruptcy protection after failing to get its broadband business off the ground.
In a declaration filed with the bankruptcy court of Wilmington, Delaware, CFO Chris Edwards said the group is seeking a buyer for the entire business or select assets. If no bidders are found after marketing the assets over the next month, the company will immediately shut down its network and wind down business operations through liquidation. Judge Carey has been assigned to Open Range’s bankruptcy case.
Open Range values its assets at US$114m, and total liabilities at US$110m. It posted an operating loss of US$50.4m last year on sales of US$1.7m.
According to a court document that lists corporations, and not government units, that directly or indirectly own 10% or more of any class of Open Range’s equity interests, hedge fund Vision Opportunity Master Fund has a 57% share of its common stock. One Equity Partners (OEP), the private investment arm of J.P. Morgan Chase & Co, owns 97% and 99.6% of the company’s Series B and Series C preferred stock, respectively.
The document also reveals that on 5 October 2011 OEP provided US$1m to Open Range, “and as of the date herein, it has not been determined whether such funds will be characterised as a loan advancement or equity contribution”.
In a list of creditors holding unsecured claims against the debtor, the group reveals requests from Adesta LLC and Velocitel Inc of respectively US$7.57m and US$5.59m. OEP appears on the list with a US$2.79m claim for management fees. Satellite operator Globalstar (US$735,827) and US telcos Level 3 (US$393,549) and AT&T (US$344,536) also feature on the list.
Back in 2009, the company secured a US$267m loan under the Department of Agriculture’s Rural Utilities Services programme to help it provide WiMAX/satellite broadband to rural communities in the US.
This five-year loan, which was later reduced to US$180m, came with requirements to build a broadband network in 546 communities in 17 states. It was also accompanied by a US$100m equity commitment from OEP.
However, Open Range has since been hit with a series of regulatory and operational difficulties that have severely inhibited its business aspirations
Last year, it was forced to search for an alternative spectrum partner after regulator FCC denied US satellite operator Globalstar an extension to milestones governing its ATC licence.
In March 2011, Open Range found this spectrum partner in US satellite/terrestrial venture LightSquared, which is backed by New-York-based hedge fund Harbinger Capital Partners.
As well as providing Open Range with frequencies to offer services, the deal allowed LightSquared to move forward with its own FCC network deployment obligations.
But this move has proven to be ill-fated, as LightSquared’s own business increasingly comes under the spotlight, owing to the GPS interference issues that affect its spectrum.
LightSquared secured an agreement in September with local manufacturer Javad GNSS to develop a system that it claims will “eliminate” interference problems with high-precision GPS receivers.
According to the venture, the process involves taking existing flagship receivers and reconfiguring filters and linear amplifiers to make them compatible with its bottom 10 MHz of spectrum – the part of its L-band frequencies that interfere with GPS systems.
But major GPS manufacturer Garmin and others in the industry remain unconvinced and, with the FCC declaring that LightSquared will not be allowed to commence services until these issues are resolved, some spectators have raised question marks over the viability of its business
Indeed, Open Range’s Chapter 11 filing comes as LightSquared CEO Sanjiv Ahuja is quoted telling one newswire that his group will need to raise US$3.5bn to be cash-flow positive over the next two years.
