September 25th passed without WorldSpace paying the $19.97 million plus interest due on its bridge loan notes. According to an SEC filing, the note holders have not agreed to a new forbearance agreement, but neither have they taken any action against the satellite radio company. Talks continue.
Company founder Noah Samara is still Chairman and CEO, at least for now. He had offered to step down if WorldSpace was not able to make the payment and the note holders asked him to resign his posts as Chairman and CEO, but remain as a director.
All of the bridge loan notes are owned by four holders. They had agreed to multiple forbearance agreements in recent months. But when the last one expired September 25th, they did not enter into a new forbearance agreement with WorldSpace. The SEC filing states that discussions are continuing between WorldSpace and the four holders, but “there can be no assurance that the Holders will continue to defer the exercise of remedies under their respective financing agreements with the Company,” WorldSpace said.
“The Company is continuing to seek new financing, but there can be no assurance that the Company will succeed in securing commitments for new financing, or that it will do so prior to the Holders seeking to exercise their remedies under their financing agreements,” it added.
RBR/TVBR observation: Can you imagine a worse time to be trying to restructure the debt of a company that has a long history of cash burn and is not even close to profitability? The note holders are in a quandary, though. Their choices are to help Samara keep WorldSpace running and find new capital or toss him overboard and bring in new management – and also have to find new capital. And then there’s the extremely painful option of forcing the company into bankruptcy and probably having to write off the entire loan if no buyer is found and the company is simply liquidated.