NextWave Wireless Inc. (NASDAQ: WAVE) is trading up today on good news. The problem is that the news around the company is that it may be holding a fire sale. When debt is owed and when operations are a fraction of what were, the end result is often a company which has to give away assets to satisfy its obligations.
The company has made two announcements:
- DOCOMO has acquired a 35% equity stake in NextWave’s subsidiary PacketVideo for $45.5 million. This is its wireless and digital home multimedia software and service applications. The company noted that the proceeds from the transaction will be applied to redeem a portion of NextWave’s Senior Secured Notes, due July 2010.
- The company has issued new notes with a sum of $15 million to creditors.
In the PacketVideo sale, DOCOMO was granted certain rights in the event of future transfers of PacketVideo stock or assets, preemptive rights in the event of certain issuances of PacketVideo Stock, and a call option exercisable under certain conditions to purchase the remaining shares of PacketVideo at an appraised value. DOCOMO will also have certain governance and consent rights applicable to the PacketVideo operations.
NextWave’s noteholders provided certain waivers, including a release of PacketVideo’s guaranty of NextWave indebtedness.
An SEC filing shows that on a closing date of July 2, 2009, NextWave Wireless Inc. and its subsidiary NextWave Wireless LLC entered into agreements where NextWave LLC issued additional Senior-Subordinated Secured Second Lien Notes due 2010 of $15,000,000. These are on the same financial and other terms applicable to NextWave LLC’s existing Senior-Subordinated Secured Second Lien Notes due 2010. Also on the same effective date NextWave issued warrants to purchase shares of its common stock to the purchaser of the Incremental Notes.
Based upon this data and data from the last few months and based on how NextWave shares have traded, we are not sure that NextWave is a company that gets to have its own say in how it operates the company. Beyond that we will watch from the sidelines to see how this plays out.
NextWave shares are up 7% at $0.505, but they were up over 12% in earlier trading. Its 52-week trading range is $0.07 to $4.22.
Jon C. Ogg
July 6, 2009
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