WorldSpace files Chapter 11 bankruptcy, plans to sell assets

By Caroline Salls

Pittsburgh, Oct. 17 - WorldSpace, Inc. filed Chapter 11 bankruptcy Friday in the U.S. Bankruptcy Court for the District of Delaware.

In connection with the bankruptcy filing, the company is negotiating the terms of up to $13 million in debtor-in-possession financing from Citadel Structured Products, Inc., Highbridge International LLC, Oz Master Fund, Ltd. and AG Offshore Convertibles, Ltd. that is expected to give WorldSpace enough liquidity for 90 days in order to find a buyer for its assets.

According to the DIP facility motion, while the company has been evaluating its alternatives and negotiating the DIP facility, its business has continued to deteriorate and insiders have been lending money to fund some of its business expenses.

However, the company's convertible noteholders have expressed their concern that the continued failure to meet expenses will jeopardize the company's reorganization prospects and impair the value of the noteholders' collateral.

In addition, WorldSpace said many of its employees have not been paid for about two months but have continued to work. The company said the noteholders are worried that critical employees may not still be willing to work under the circumstances.

WorldSpace is requesting court approval to use $2 million of the DIP financing on an emergency basis since the company and its convertible noteholders have not finished negotiating the terms of the final DIP facility.

The emergency DIP loan will mature in 90 days.

Interest will be Libor plus 1,200 basis points.

Debt details

WorldSpace listed $307.38 million in assets and $2.123 billion in debt as of June 30.

The company's largest unsecured creditors include:

•Yenura Pte. Ltd., Singapore, with a $55.22 million unsecured loan claim;

• Micronas GmbH, Freiburg, Germany, with an $18.24 million trade debt claim;

• Fraunhofter Institute for Integrated Circuits, Erlangen, Germany, with a $4.45 million trade debt claim;

• Flextronics, Westford, Mass., with a $2.34 million trade debt claim;

• Thales Alenia Space France, with a $2.2 million trade debt claim;

• Delphi Delco Electronics Europe GmbH, Bad Salzdetfurth, Germany, with a $1.22 million trade debt claim; and

• Baker & McKenzie, New York, with a $1.15 million trade debt claim.

The filing also includes WorldSpace affiliates AfriSpace, Inc. and WorldSpace Systems Corp.

WorldSpace, based in Silver Spring, Md., has established an operational satellite-based digital radio system, commonly known as Digital Audio Radio Service, and is a licensed DARS provider. Its Chapter 11 case number is 08-12412.

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