Powerwave seeks OK for creditor settlement, wants Chapter 7 conversion

By Jim Witters

Wilmington, Del., May 30 - Powerwave Technologies, Inc. is seeking formal approval of an agreement with the official committee of unsecured creditors and indenture trustee Deutsche Bank Trust Co. Americas that was read into court records on May 16, according to a May 30 filing with the U.S. Bankruptcy Court for the District of Delaware.

The company also is seeking to convert the Chapter 11 case to Chapter 7.

The agreement allowed for approval of P-Wave Holdings, LLC's $10.25 million credit bid for Powerwave's intellectual property and other intangible assets.

Judge Mary F. Walrath approve the sale, subject to the settlement agreement.

Settlement terms

Under the proposed agreement:

• P-Wave will supply $150,000 for distribution to unsecured creditors;

• P-Wave will contribute $250,000 to a trust to fund the prosecution of claims, causes of action and other litigation on behalf of the debtor's estate.

• Proceeds from the litigation will be disbursed with the first $250,000 going to P-Wave, 80% of the next $2.5 million going to P-Wave and 20% going to unsecured creditors, 75% of the next $2.5 million going to P-Wave and 25% going to unsecured creditors and 40% of any recovery above $5 million going to P-Wave and 60% to unsecured creditors;

• P-Wave's total recovery from all sources in this case would be capped at 150% of its claims;

• P-Wave will receive the disputed assets in the sale; and

• The debtor, the committee, Deutsche Bank and P-Wave will discuss the best option for winding down the case.

Conversion motion

At the May 16 hearing, creditors committee attorney Michael G. Burke said the intent was to file a Chapter 11 plan of liquidation.

"The parties could not reach agreement on sufficient funding of the debtor's Chapter 11 case to propose and confirm a Chapter 11 liquidating plan, so the settlement will be implemented through a conversion to Chapter 7," the motion states.

The debtor-in-possession loan and Powerwave's use of cash collateral matured on May 17.

P-Wave agreed to provide the debtor with $150,000 of funding from May 18 through May 31. The debtor has about $2.4 million of cash on hand.

Powerwave plans to transfer $1.05 million of its cash to the Chapter 7 trustee to fund the administrative reserve, the carve out for general unsecured creditors and the trustee fund.

The remainder of the cash will be transferred to P-Wave.

The debtor also is requesting that $650,000 of sale proceeds or P-Wave collateral remain in the estate for use by the Chapter 7 trustee.

No hearing has been scheduled for consideration of the motions.

Powerwave Technologies, a Santa Ana, Calif.-based global supplier of end-to-end wireless solutions for wireless communications networks, filed for bankruptcy on Jan. 28. Its Chapter 11 case number is 13-10134.

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