Pareteum committee expresses concerns over stalking horse deal

By Sarah Lizee

Olympia, Wash., May 31 – Pareteum Corp.’s official committee of unsecured creditors filed a limited objection on Monday to the company’s proposed bid procedures, according to court documents filed with the U.S. Bankruptcy Court for the Southern District of New York.

The committee said that while it generally supports a marketing process for the assets, it has concerns over the stalking horse bid, particularly the credit bid amount and current terms of the stalking horse agreement.

The group said it has concerns regarding, among other things, the validity of the prepetition secured debt that the stalking horse bidders seek to credit bid.

The committee also said that the stalking horse deal would likely leave the estate without enough assets to permit the debtors to file a plan of liquidation, wind down the estates, resolve and make distributions to unsecured creditors, and permit the estates to pursue potentially significant causes of action against some parties.

“Locking in the proposed stalking horse bid now would not just chill the sales process; rather it could predetermine the ultimate outcome of these Chapter 11 cases,” the committee said.

The group also has concerns about the proposed bid protections under the stalking horse deal and called them “wholly unnecessary in this case.”

Background

Before filing Chapter 11, the company’s board of directors and management evaluated strategic alternatives and implemented an asset sale strategy, Pareteum said in a press release.

Circles MVNE Pte. Ltd. has combined with Channel Ventures Group, LLC for a stalking horse asset purchase agreement for substantially all of the assets of the company.

Circles has agreed to acquire the company’s mobile virtual network enabler business and associated contracts, and Channel Ventures has agreed to acquire the company’s mobile virtual network operator, interactive digital media, iPass, and small and medium business enterprise businesses and associated contracts.

Consideration for the sale is a credit bid against about $60 million in secured claims under prepetition loans and proposed debtor-in-possession loan held by the stalking horse bidders.

The stalking horse agreement includes a $1.5 million expense reimbursement and a 1.9% breakup fee.

These agreements are subject to higher and better offers, as well as approval from the bankruptcy court.

Under the proposed bid procedures filed with the court, the bid deadline is June 13, an auction will take place on June 15, and a sale hearing will take place on June 22.

New York-based Pareteum is a cloud communications platform-as-a-service company. The company filed bankruptcy on May 15 under Chapter 11 case number 22-10615.

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