Open Range Communications' final DIP delayed; court OKs bid procedures

By Jim Witters

Wilmington, Del., Nov. 2 - Open Range Communications, Inc.'s final approval for $6 million in debtor-in-possession financing was delayed Wednesday by objections from two parties, but the company's procedures for selling substantially all its assets were given the green light during a hearing in the U.S. Bankruptcy Court for the District of Delaware.

Judge Kevin J. Carey could consider the final DIP motion as early as Nov. 3 if the debtors can reach agreement with creditors Alvarion, Inc. and G4S Technology, LLC.

During a three-hour recess of the hearing, the debtors were able to resolve objections from the official committee of unsecured creditors and Velocitel, Inc.

But Alvarion and G4S continued to object to the broad release of the U.S. government's Rural Utility Service contained in the proposed DIP order.

Debtors attorney Norman L. Pernick said he believed until noon Nov. 2 that there was agreement among the parties, but the two creditors raised new concerns.

Rural Utility release opposed

G4S attorney Ronald Gellert and Alvarion attorney Mark A. Salzberg said the release being granted to the Rural Utility Service under the proposed DIP order constituted a "material change" to the motion that was not contained in earlier versions. They argued that they need time to file objections to the revised DIP proposal.

At issue is $15 million in reimbursements from the Rural Utility Service that Open Range packaged before petitioning for bankruptcy, but did not submit to the service.

"Unless the sale price [for the business] goes up, RUS is letting the estate use $1 million of its money in exchange for getting $15 million back," Salzberg said.

He asked that the Rural Utility Service release be stricken from the DIP order.

Judge Carey indicated he is not inclined to strike the release. Salzberg then asked to Alvarion be allowed to be part of the investigation of claims.

"If you believe the claims are not being properly investigated, come back to me," Carey said.

Pernick said he would revise the proposed final DIP order and circulate it among the parties for comment before submitting it to the court. Alvarion and G4S could then file objections to the revised motion.

Chapter 11 uncertainty

Before the three-hour recess, Carey said he wondered whether the case belonged in Chapter 11 and not Chapter 7.

He said the numbers in this case were "at the far end of what ain't there.

"Whether Chapter 7 ends up better for some of the creditors or not is not the central focus. But I question whether this belongs in Chapter 11. What would be the point of that in the end?" Carey said.

Pernick said the idea behind the Chapter 11 filing was to continue to provide broadband internet service to Open Range's 100,000 rural customers and to keep Open Range employees working.

The $2 million stalking horse offer from totheHome.com, LLC drew "some interest" from other prospective bidders, Pernick said. No additional bids have been submitted.

"We have made a lot of progress here, and we are in a good position to meet the goals we set," Pernick said.

Carey said he does not disagree with the goals, "but this may not be the proper forum."

As the parties prepared to leave the courtroom to resume negotiations, Carey said, "Unless there is some consensus here, I don't think this belongs in Chapter 11."

Sale procedures

Under the order issued Nov. 2, bids are due by Nov. 11. The auction is scheduled for Nov. 14. The sale hearing is set for Nov. 15 with a goal of receiving court approval by Nov. 17.

According to the bid procedures motion, totheHome.com will pay up to $350,000 per week for the continued operation of customer service operations from Nov. 8 until completion of the sale.

If totheHome.com is not the high bidder, Open Range will pay it a break-up fee of 4% of the purchase price and reimburse up to $170,000 of its sale-related expenses.

Other motions granted

Carey also granted motions authorizing an incentive plan for key employees, allowing the sale of miscellaneous non-core assets, authorizing the debtors to hire FTI Consulting Inc. to provide a chief restructuring officer and allowing the hiring of Cole, Schotz, Meisel, Forman & Leonard, PA as bankruptcy counsel.

Open Range Communications is a Greenwood Village, Colo.-based broadband company that filed for bankruptcy on Oct. 6. Its Chapter 11 case number is 11-13188.

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