Chadmoore awaits shareholder approval for sale to Nextel
Chadmoore Wireless Group, Las Vegas, continues to operate with substantial losses as it awaits the sale of its assets to Nextel Communications, Reston, VA. Chadmoore reported $1 million in revenue and a loss of $4 million for the quarter ended Sept. 30, 2001.
Meanwhile, the company’s lenders, GATX Capital and Barclays Bank, along with other creditors and shareholders, await the closing of a transaction valued at about $130 million. The transaction would convey most of Chadmoore’s FCC licenses, equipment and customer contracts to Nextel. The price represents a premium to the roughly $50 million valuation placed on Chadmoore’s assets. A company statement indicated that Nextel, and perhaps no other company, is in a position to use Chadmoore’s licensed spectrum to such advantage that the price is sensible. Chadmoore valued its liabilities at $61 million.
Nearly out of operating funds, Chadmoore indicated in a Dec. 17, 2001, proxy statement to shareholders that it intends to borrow $6.5 million from Recovery Equity Investors II—under one condition: that Chadmoore’s plan for selling the identified assets to Nextel, dissolving as a corporation and liquidating any residual assets is approved by shareholders. Recovery Equity Investors II is Chadmoore’s largest shareholder.
Nextel would pay the $130 million in cash or stock in a transaction complicated by uncertainty about the transaction’s tax consequences. Whether the Internal Revenue Service would treat the transaction as a tax-free reorganization or as a taxable sale is unknown, and apparently cannot be determined until after the fact because of variables that can change until the moment of closing.
Chadmoore’s proxy statement warned its shareholders that its lenders and Chadmoore itself intend to immediately sell Nextel shares they may receive when the transaction closes. That sale of shares may depress the price of Nextel stock, the statement warned, adversely affecting the value of Nextel shares received by all shareholders. GATX Capital is expected to sell about $21.5 million worth of shares it would receive to pay its loan balance; and Barclays Bank, about $20 million. Whether Nextel would pay in cash or in stock is uncertain, though, and depends in part on the price of Nextel stock at the time of closing.
A date for the transaction was not specified, but Feb. 15, 2002, was used in the statement as an example: “[I]f the asset sale were to occur on February 15, 2002, [Chadmoore’s’] indebtedness to Barclays Bank would be about $25.6 million.” Just before the transaction closes, Chadmoore plans to pay Barclays about $5 million from the money it would be lent by Recovery Equity Investors II if shareholders approve the transaction, leaving about $20 million owed to Barclays when the transaction closes.
The Chadmoore proxy statement indicated that, barring contingent liabilities that could affect the payout, shareholders might eventually receive the equivalent of about 57 cents per share. Chadmoore’s stock traded at 52 cents per share at mid-afternoon today.