WAM!NET has revealed details of the financing plan that it hopes to put in place to avoid going into Chapter 11 bankruptcy protection.
This is the bridge we were looking for to move to a cashflow-positive business in 2002, said marketing manager John Taylor.
According to its 27 July filing to the Securities and Exchange Commission (SEC) WAM!NETs available cash and borrowings are insufficient to fund current operations and it is in arrears to creditors and lenders.
It has until next Tuesday (7 August) to get clearance for the deal with Cerberus Capital Management for a 70m ($100m) loan at 35% annual interest.
To go through it needs the approval of the majority of the holders of its 13 and three-quarters senior discount notes, of which Cerberus and its associates own 42%. It also needs to complete a deal with bankrupt wireless telecoms firm Winstar to be approved
by the bankruptcy court
in charge of Winstar.
The deal with Cerberus is the only discussion to have reached the letter of intent stage.
Under the terms of the agreement Cerberus can convert the debt into a 49% stake in WAM!NET and
an additional 49% in its subsidiary WAM!NET Government Services (WGS).
WGS has a contract with EDS over five years to supply the network for the US Navy Marine Corp Intranet project, worth between 524m to 664m. So far it has received 7.7m for the project, which began last October.
Under terms of the deal Cerberus will take 20% of WGS revenue at source to service its interest payment with the option to raise that to nearly 50%.
In Greek mythology Cerberus was Hades three-headed dog with the tail of a serpent that guarded the Underworld.
Story by Barney Cox
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