Pareteum files Chapter 11 bankruptcy to facilitate sale of assets

By Sarah Lizee

Olympia, Wash., May 16 – Pareteum Corp. filed Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York late Sunday.

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.

The company said it expects to continue operations as usual during the Chapter 11 process.

To help fund and protect its operations, Pareteum has received a commitment from Circles for up to $6 million in DIP financing.

The company is seeking interim access to $3 million of the facility.

Interest is 9% per year, paid in kind. There is a 0.5% commitment fee, a 2% upfront fee and a 1.5% exit fee.

The facility is set to mature in 210 days from closing.

The financing, along with normal operating cash flows and the consensual use of cash collateral, will fund post-petition operations and costs under normal terms.

“Pareteum has faced numerous challenges in the last few years, especially in light of an increased cost of capital and the Covid-19 pandemic and has been working towards resolving legacy corporate issues while making progress to lay a foundation for future growth,” Bart Weijermars, Pareteum's interim chief executive officer, said in the release.

The company filed customary motions with the court intended to allow Pareteum to maintain operations in the ordinary course, including paying employees and continuing existing benefits programs, meeting commitments to customers and fulfilling go-forward obligations, including vendor payments.

In its petition, the company listed $10 million to $50 million in assets and $50 million to $100 million in liabilities.

Its largest unsecured creditors are AT&T Mobility, based in Plano, Tex., with a $3.41 million trade debt claim, Gogo LLC, based in Chicago, with a $2.38 million trade debt claim, T-Mobile Germany, based in Bonn, Germany, with a $1.65 million trade debt claim, and Channel Ventures, based in Rotterdam, the Netherlands, with a $1.44 million unsecured note claim.

King & Spalding LLP is serving as legal counsel, FTI Capital Advisors, LLC is serving as investment banker and FTI Consulting is serving as restructuring adviser to Pareteum.

New York-based Pareteum is a cloud communications-platform-as-a-service company. The Chapter 11 case number is 22-10615.

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