Troubled satellite radio broadcaster Worldspace is seemingly out of cash. Sources within the company say senior staff have already forfeited at least two salary payments, and this coming Tuesday’s payroll will again evidently have problems.
Another source says that CEO Noah Samara last week held an all-staff
meeting, telling them: "We just need funding and execution." One source
stated that he has been repeating much the same mantra for more than
eight years.
Worldspace, for what seems the umpteenth time, is again talking to its
bridging debt-holders about rolling over its repayment obligations to
them, this time until July 31. The original binding “Mandatory
Redemption Date” for the debt was May 31, then June 30, then July 9,
all of which were missed. But it is now paying a crippling rate of
interest for missing its repayment obligations.
Bit by bit Worldspace’s debt-holders are winning large chunks of
Worldspace because of its default in repaying the assorted loan-notes.
However, Nasdaq rules limit the amount of debt and warrants that
Worldspace can convert into shares to a total of 19.9% of the firm’s
issued Class A shares unless approval is given by the company’s
shareholders. Hence Worldspace has to call a special meeting to be held
no later than August 15 to approve the move.
The loans were sourced from Highbridge Capital Management (through
Highbridge Int’l LLC); OZ Management (through OZ Master Fund), Angelo,
Gordon & Co (through AG Offshore Convertables) and Citadel Limited
Partnership (through its Citadel Equity Fund).
Back in early June, in a formal statement, Worldspace said: “This
agreement gives the Company time to bring in the funds already
committed to it and to raise new funding.” On April 5 its auditors
expressed formally their concern as to Worldspace’s financial status,
and this despite numerous promises and commitments made by Noah Samara
about fresh injections of capital.
On January 2 Samara, in a formal SEC statement said he had secured $40m
in fresh funding – from himself, or at least in the shape of a
injection of $40m from Yenura Pte Ltd, a company controlled by Mr
Samara, which had placed $40m of subordinated financing into
WorldSpace, "effective immediately". We’ll have to wait for this past
quarter-year’s financials to see how much of that cash ever arrived
into Worldspace’s depleted coffers.
Worldspace’s debt is now large – and growing by the day. Worldspace’s
SEC statement of July 10 said “the aggregate outstanding principal
amount of the Bridge Notes is $36,145,361. (ii) the aggregate
outstanding principal amount of the Convertible Notes is $53,149,779.,
and (ii) the Company is unconditionally indebted and liable for the
repayment in full of the outstanding amount of all obligations under
the WorldSpace Notes, without offset, defense or counterclaim of any
kind, nature or description.” Worldspace has also signed to pay
interest rates to the note-holders, of 11.18% for the period to July 9,
and a heavyweight 15% from the default date.
What are Worldspace’s assets? A couple of tired satellites and a
partly-built ground-spare that needs cash spent on it to ready it for
launch (and a launch/insurance bill to get it into orbit). A sale &
leaseback deal was under consideration last year, but came to nothing
and now in these even more troubled times the prospects are even worse.
The company also has licences in places like Germany and Italy, and its
over-arching satellite L-band licences but it is seemingly without the
cash to bring European services to market. A larger question in the
event of some sort of liquidation or transfer of assets is what might
happen to its joint-venture operations in places like Italy (with Class
Editori).
Meanwhile, founder, president, chairman and CEO at Worldspace is Noah
Samara, still seemingly attempting to court favourable publicity,
perhaps as a counter to the unpleasant Washington financial scandal to
which his name has been linked or the legal Class Action that’s still
outstanding against him and Worldspace jointly and severally. At the
end of April a documentary film, Africa Investment Horizons, was
screened at the New York Stock Exchange. The movie was made to show
“Africa’s role as a major player in the global economic field [and] is
underscored by the fact that film production funds were generated
solely from African sources, including: Noah A. Samara, CEO of
Worldspace; Sasol; Coca-Cola Africa; Industrial Development
Corporation; Trust Africa; and Open Society Foundation for South
Africa,” said a release at the time.
Quite why Mr Samara needs this sort of management distraction is
anyone’s guess. But with Worldspace’s current position and its growing
indebtedness, it is something of a surprise. Its position is now
catastrophically precarious, and the repeated financial problems would
seem to suggest that Worldspace is not going to escape this downward
spiral. Its position is akin to those all-too-desperate last throws of
the dice in a game of Monopoly. This time Worldspace seems to be
landing on penalty square after penalty square with no income to
sustain it.
