Velti U.S. operations in bankruptcy to complete sale to GSO affiliates

Sale expected to close by end of 2013

By Caroline Salls

Pittsburgh, Nov. 4 - Velti plc's U.S. operations, including Velti Inc. and Air2Web, Inc., filed Chapter 11 bankruptcy on Monday in the U.S. Bankruptcy Court for the District of Delaware to facilitate a sale of the company's U.S., U.K. and India mobile marketing businesses and some of its U.S.-based advertising businesses to affiliates of GSO Capital Partners LP, the credit division of Blackstone, according to a news release.

Velti said the proposed transaction includes the sale of business lines operated by Velti Inc. and Air2Web in the United States, Air2Web India, and Velti DR Ltd. and Mobile Interactive Group, Ltd. in the United Kingdom.

According to the bid procedures motion filed with the court, the GSO affiliates' stalking horse bid includes the assumption of liabilities, a $26.25 million reduction in the total amounts outstanding under Velti's debtor-in-possession financing agreement, a $3.75 million reduction of the total amount outstanding under a pre-bankruptcy credit agreement and $1.25 million in cash for payment of cure costs for assumed executory contracts and other costs and expenses.

Competing bids are due by 9 a.m. ET on Dec. 3 and must meet or exceed a cash amount equal to the value of the sum of the DIP credit bid and release, the pre-bankruptcy credit bid and release and the amount of an expense reimbursement equal to the stalking horse bidder's sale-related fees and expenses, plus a $2 million overbid amount.

The auction is scheduled for Dec. 9. Bids at auction must be made in minimum increments of $1 million.

"Both this sale agreement and GSO's recent acquisition of our secured debt demonstrate GSO's commitment to providing the business with the support necessary to grow and prosper," Velti chief executive officer Alex Moukas said in the release.

All operations included in the proposed sale agreement will continue as normal throughout the sale process. The sale is expected to close by the end of 2013.

DIP financing

Additionally, GSO has committed to provide $26.25 million of debtor-in-possession financing, including a $10 million cash injection to support the operations included in the proposed sale, $15 million total principal amount of loans outstanding under the pre-bankruptcy credit agreement and $1.25 million of fees to be paid in kind and added to the outstanding principal amount of the DIP loans.

U.S. Bank, NA is the administrative agent.

The facility will mature on the earliest of 30 days after entry of the interim order if the final order has not been entered, Dec. 31, subject to the borrower's election to extend that date to Jan. 30, the effective date of a Chapter 11 plan, the closing of the sale and the acceleration of the DIP loans.

Interest will be 12%.

Velti said the bankruptcy filing does not include any of its operations in the United Kingdom, Greece, India, China, Brazil, Russia, the United Arab Emirates or any other jurisdictions outside the United States.

Debt details

According to court documents, Velti Inc. has $10 million to $50 million of assets and $50 million to $100 million of debt.

The company's largest unsecured creditor is T-Mobile USA, Inc. of Cincinnati, with a $1 million trade debt claim.

The company is represented by DLA Piper LLP (US).

Based in London, Velti plc provides mobile software platforms, applications and services for operators and advertising agencies in southeastern Europe, the United Kingdom and the United States. The U.S. operations' Chapter 11 case number is 13-12878.

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