💥New Chapter 11 Bankruptcy - Airspan Networks Holdings Inc. ($MIMO)💥
Failed deSPAC seeks to fully equitize funded debt with prepackaged plan.
On March 31, 2024, FL-based Airspan Networks Holdings Inc. ($MIMO)(“Airspan,” and, collectively with three of its affiliates, the “debtors”) filed straddle prepackaged chapter 11 bankruptcy cases in the District of Delaware (Judge Horan). The provider of software and hardware for 4G and 5G networks for both public telecom service providers and private network implementations felt compelled to end (i) our Q1 as a rare busted-deSPAC-sh*tco (see New Beginnings Acquisition Corp.) to hit the bankruptcy bin in ‘24 and (ii) Softbank Group’s quarter* with another busted equity investment. Good frikken times.
What does Airspan do? F*ck if we know. Read this and see if you can make heads or tails of it:
The Company offers a broad range of software defined radios, broadband access products and network management software to enable cost-effective deployment and efficient management of mobile, fixed and hybrid wireless networks. The Company’s customers include leading mobile communications service providers (“CSPs”), large enterprises, military communications integrators and internet service providers (“ISPs”) working to deliver high-capability broadband access to numerous markets. The Company’s mission is to disrupt and modernize network total cost of ownership (“TCO”) models. The Company aims to lower costs for customers throughout the product lifecycle, from procurement through commissioning and ongoing operating costs.
Yeah, we still don’t know. As a practical matter, your gawd-awful in-flight Gogo wifi experience appears to be powered by an Airspan enterprise private network. Similarly, Airspan tech helps IT-company Thales provide coverage in the New York City subway system. Which, for Johnny at least, never seems to f*cking work. 🤷♀️
Anyway, it doesn’t matter. There was enough razzle dazzle in there to attract a SPAC sponsor (lulz) and go public — despite the fact that this thing basically hemorrhages cash, having “incurred significant operating losses in part due to its commitment of significant resources to research and development….” PS, attracting a SPAC sponsor in the beginning of ‘21 is a pretty low bar and most investors saw this thing for the turd it is even back then. The deSPAC transaction closed in August ‘21 (lol, of course) and, after taking into account heaps upon heaps of redemptions, only raised $115.5mm of which $75mm was a PIPE and $50mm was convertible notes issued to Fortress Investment Group (“Fortress”). Per the debtors’ disclosure statement, “The De-SPAC Transaction and the PIPE Financing did not result in sufficient capital for the Company and, as a result, the Company had to rely on further financing from senior secured lenders. The Company was thus left in an over-leveraged position given its subsequent revenue performance.” Basically this 💩 was in “strategic alternatives” mode the second it hit the tape. Like, seriously, folks. Per the debtors’ disclosure statement, “Beginning in September 2021, Airspan began exploring a strategic transaction to maximize the value of the enterprise for its stakeholders.” LITERALLY A MONTH AFTER THE DESPAC DEAL CLOSED, LOLOLOLOL.
About that “further financing.” There was a lot of it over time such that the petition date capital structure looks like this:
And that’s after the debtors sold the common stock of a business associated with Airspan’s affiliate Mimosa Network for $60mm in March ‘23 and used $45mm of the proceeds to pay down senior secured debt.
The “further financing” and asset sale weren’t enough to ward of continuing liquidity problems brought on — in addition to the leverage out of the gate — by pandemic-induced supply chain disruptions and inflation. Consequently, the debtors formed a special committee of three independent directors and, once again, evaluated strategic alternatives including a (failed) sale and marketing process. To pursue this process and, once it failed, pivot towards a balance sheet restructuring, the debtors’ lenders (read: Fortress) funded $37.4mm of the above-noted debt between December ‘23 and March ‘24. Ultimately this money bought everyone a restructuring support agreement (“RSA”) — supported by 95% of the senior secured lenders and 100% of the subordinated term lenders — and the proposed plan filed on the petition date.**
So what does this proposed plan accomplish? A number of things:
📍It fully equitizes the $205mm of total funded debt with (a) the senior secured creditors getting 94.375% of the post-reorg equity subject to dilution by (i) the MIP, (ii) the new money infusion (see immediately below), (iii) the warrants (see lower down), and (iv) the backstop premium (also see lower down) and (b) subordinated creditors — both term lenders and convertible noteholders alike — getting 5.625% of the post-reorg equity (subject to same dilution as senior secureds);
📍It infuses $20mm of new money into the post-reorg company as part of an overall $95mm pre-petition-senior-secured-creditor-backstopped “equity investment opportunity” (that otherwise pays down the proposed DIP, discussed below, and of which $90mm of the “opportunity” is available to the senior secured creditors and the remaining $5mm offered ratably to the subordinated term creditors);***
📍It pays general unsecured creditors in full (the DS notes ~$2mm of trade);
📍It contains an equity death trap that provides ratable sharing of a $450k cash distribution available to equityholders who do not opt out of proposed plan releases or, in lieu of cash, an opportunity to elect to receive warrants that, if the company were to basically triple its implied enterprise value, be worth up to 3% of the post-reorg equity.
The debtors intend to fund the bankruptcy process via a $55.5mm DIP credit facility ($7.5mm interim) within which the debtors and the senior secured lenders intend to roll-up the aforementioned $37.4mm. The DIP will accrue PIK interest and carry a 3% commitment fee (of all DIP obligations, earned upon entry of the interim order) and a 3% exit premium payable at maturity (if not earlier under the plan).
The debtors are represented by Dorsey & Whitney LLP (Eric Lopez Schnabel, Samuel Kohn, Alessandra Glorioso, Michael Galen, Rachel Stoian) as legal counsel, VRS Restructuring Services LLC (Jeffrey Varsalone) as financial advisor, and Intrepid Investment Bankers (Lorie Beers, Carl Comstock) as investment bankers. The senior secured creditors are represented by Davis Polk & Wardwell LLP (Damian Schaible, David Schiff, Amber Leary) and the consenting subordinated lenders are represented by Sidley Austin LLP (Stephen Hessler, Anthony Grossi, Jason Hufendick).
*According to the petition, Softbank owns a 21% interest in the debtor, ranking second to Oak Investment Partners’ 43%.
**The RSA authorizes the debtors to pursue a post-petition sale and marketing process subject to the consent of the debtors’ required consenting senior secured creditors. Any sale proposal must come in by April 26, 2024 and must cover all or substantially all of the debtors’ assets and include enough cash to satisfy the DIP and senior secured claims and leave subordinated creditors, equity and GUCs better off than they’d be under the proposed plan. It would need to close by the end of May. So, yeah, this is very unlikely to happen.
***The equity backstop premium is 10% of $20mm, payable as new money common equity. Price per share is based on $86mm EV.
Company Professionals:
Legal: Dorsey & Whitney LLP (Eric Lopez Schnabel, Samuel Kohn, Alessandra Glorioso, Michael Galen, Rachel Stoian, Hannah-Kaye Fleming, Megan Baker)
Financial Advisor: VRS Restructuring Services LLC (Jeffrey Varsalone)
Investment Banker: Intrepid Investment Bankers (Lorie Beers, Carl Comstock)
Claims Agent: Epiq (Click here for free docket access)
Other Parties in Interest:
Senior Secured Creditors: Fortress Investment Group
Legal: Davis Polk & Wardwell LLP (Damian Schaible, David Schiff, Amber Leary, Christopher Robertson) and Richards Layton & Finger PA (John Knight, Brendan Schlauch, Zachary Javorsky)
Consenting Subordinated Term Loan Lender & Equity Holder: Softbank Group Capital Limited
Legal: Sidley Austin LLP (Stephen Hessler, Anthony Grossi, Jason Hufendick) and Benesch Friedlander Coplan & Aronoff LLP (Michael Barrie, Jennifer Hoover, Steven Walsh, Juan Martinez)
Prepetition Subordinated Convertible Noteholder: Golden Wayford Limited