Subject: [NEXTEL-1] Nextel International- Lock-up ruling roils bar

From: Marcel <[email-masked]>
Date: Fri, 25 Oct 2002 15:49:56 -0400

Nextel International- Lock-up ruling roils bar
by Terry Brennan Posted 03:34 EST, 24, Oct 2002

When a Delaware judge threw out some creditor votes in favor of bankrupt NII Holdings
Inc.'s reorganization
plan, she sent reverberations through the bankruptcy bar by challenging a common practice
in so-called
lock-ups.

Judge Mary Walrathof the U.S. Bankruptcy Court for the District of Delaware in Wilmington
on Tuesday, Oct. 22,
approved a motion by the U.S. Trustee seeking to disqualify votes on NII's third amended
prenegotiated plan. In
doing so, she found that the votes were solicited after the bankruptcy petition date and
that such a solicitation
would require the filing of a disclosure statement.

No such disclosures were made.

Sloppy lawyering? No, say attorneys. Just a stricter interpretation of the federal
bankruptcy code on lock-ups,
which are agreements meant to capture prepetition support of key creditors to help debtors
build reorganization
plans after Chapter 11 filings.

Walrath's ruling is based on Section 1125(B) of the bankruptcy code and could change the
way attorneys use
lock-ups in the future, said William Rochelle, an attorney at Fulbright & Jaworski LLP in
New York who's
uninvolved in the case.

The judge's ruling, he said, "could be the first significant test case" on a stricter
application of the law.

"This could become a really important decision because bankruptcy lawyers have never
really known whether the
solicitation of votes without a disclosure statement violates provisions in the code,"
Rochelle said. "Judge
Walrath has drawn a bright line in the sand that could convince lawyers to think twice
about soliciting votes
during lock-ups."

A challenge to Walrath's ruling isn't likely, either. At least not in the NII case.
Reston, Va.-based NII, previously
Nextel International, will seek to convince Walrath Oct. 28 that it still has enough
creditor support for its plan
even after votes by senior lender Motorola Credit Corp. (MCC) and some bondholders were
disqualified,
according to the debtor's co-counsel, Daniel DeFranceschi of Richards, Layton & Finger PA
in Wilmington.

"We still have the votes of something like 93% to 94% in claims amount and 75% to 76% in
number, however,
and absolutely expect the plan to be approved Monday," DeFranceschi said.

NII had forged its plan with the prepetition support of MCC; its exclusive wireless
supplier, Motorola Inc.; Nextel
Communications, its largest equity holder and unsecured creditor; and more than 90% of the
unsecured
bondholders, records show.

The plan calls for NII to slash its $2.7 billion debt by some 80% to about $500 million.
Nextel and holders of $2.3
billion worth of unsecured bonds will make a $190 million capital infusion, with the
former contributing $50 million
and the latter putting up the rest.

Holders of $281.7 million in secured claims would be made whole via a package of $56.65
million in cash and
preferred stock. Motorola affiliates would also get full recovery on $73 million in
secured claims, filings show.

Unsecured creditors would have the right to acquire their pro-rated share of NII's new
notes and up to 80%, or 3.2
million, of the 4 million shares of new common stock under a rights offering. The company
had no bank debt.

NII ran into trouble when U.S. Trustee Donald Walton objected to the proposed plan on
grounds that the
company solicited votes for its approval after it filed for bankruptcy May 24.

"The conclusion is inescapable that the debtors were asking for the creditors' votes in
soliciting signatures to
consummate the lock-up agreements ... and have, in effect, disenfranchised every creditor
except for their
self-selected 'key players,'" Walton said in his objection. "The key players were, under
the pain of injunctive
relief, required to commit in advance to a position on a to-be-written plan without the
benefit of the disclosure
[statement] as required by law."

NII's unofficial bondholders committee, however, objected to Walton's motion.

"Contrary to the trustee's assertions, the lock-up agreements simply did not create any
unconditional,
irrevocable obligations to vote for the proposed plan and were not tantamount to votes, as
the trustee alleges,"
countered the committee, which represents more than 99% of the company's unsecured debt.

Filings show that the committee cited support from 97% of the unsecured creditors in value
and 84% in number
for the reorganization plan.

NII filed for Chapter 11 after it defaulted on a $41 million interest payment on its
12.75% senior serial redeemable
notes due 2010. It listed $3.26 billion in liabilities and $1.24 billion in assets as of
Dec. 31, 2001.

A year-long effort to restructure failed, NII said, and Houlihan Lokey Howard & Zukin
Capital Inc. was hired to
shop the company prior to its Chapter 11 filing.

Evan Flaschen, Patrick Troftle and William Govier are NII's lead counsel at Bingham
McCutchen LLP.

Thomas Kreller and Paul Aronzon in Los Angeles are lead counsel for the unofficial
bondholders at Milbank,
Tweed, Hadley & McCloy LLP while Gregory Werkheiser, Donna Harris and Robert Dehney are
Wilmington
co-counsel at Morris, Nichols, Arsht & Tunnell in Wilmington.

Todd Meyer and Dennis Meier in Atlanta at Kilpatrick & Stockton LLP are lead counsel for
the official
unsecured creditors committee while Mark Minutti is Wilmington co-counsel at Saul Ewing
LLP. Paul Harner in
Chicago at Jones, Day, Reavis & Pogue represents Nextel.

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Lock-up ruling roils bar
by Terry Brennan Posted 03:34 EST, 24, Oct 2002

When a Delaware judge threw out some creditor votes in favor of bankrupt NII Holdings Inc.'s reorganization plan, she sent reverberations through the bankruptcy bar by challenging a common practice in so-called lock-ups.

Judge Mary Walrathof the U.S. Bankruptcy Court for the District of Delaware in Wilmington on Tuesday, Oct. 22, approved a motion by the U.S. Trustee seeking to disqualify votes on NII's third amended prenegotiated plan. In doing so, she found that the votes were solicited after the bankruptcy petition date and that such a solicitation would require the filing of a disclosure statement.

No such disclosures were made.

Sloppy lawyering? No, say attorneys. Just a stricter interpretation of the federal bankruptcy code on lock-ups, which are agreements meant to capture prepetition support of key creditors to help debtors build reorganization plans after Chapter 11 filings.

Walrath's ruling is based on Section 1125(B) of the bankruptcy code and could change the way attorneys use lock-ups in the future, said William Rochelle, an attorney at Fulbright & Jaworski LLP in New York who's uninvolved in the case.

The judge's ruling, he said, "could be the first significant test case" on a stricter application of the law.

"This could become a really important decision because bankruptcy lawyers have never really known whether the solicitation of votes without a disclosure statement violates provisions in the code," Rochelle said. "Judge Walrath has drawn a bright line in the sand that could convince lawyers to think twice about soliciting votes during lock-ups."

A challenge to Walrath's ruling isn't likely, either. At least not in the NII case. Reston, Va.-based NII, previously Nextel International, will seek to convince Walrath Oct. 28 that it still has enough creditor support for its plan even after votes by senior lender Motorola Credit Corp. (MCC) and some bondholders were disqualified, according to the debtor's co-counsel, Daniel DeFranceschi of Richards, Layton & Finger PA in Wilmington.

"We still have the votes of something like 93% to 94% in claims amount and 75% to 76% in number, however, and absolutely expect the plan to be approved Monday," DeFranceschi said.

NII had forged its plan with the prepetition support of MCC; its exclusive wireless supplier, Motorola Inc.; Nextel Communications, its largest equity holder and unsecured creditor; and more than 90% of the unsecured bondholders, records show.

The plan calls for NII to slash its $2.7 billion debt by some 80% to about $500 million. Nextel and holders of $2.3 billion worth of unsecured bonds will make a $190 million capital infusion, with the former contributing $50 million and the latter putting up the rest.

Holders of $281.7 million in secured claims would be made whole via a package of $56.65 million in cash and preferred stock. Motorola affiliates would also get full recovery on $73 million in secured claims, filings show.

Unsecured creditors would have the right to acquire their pro-rated share of NII's new notes and up to 80%, or 3.2 million, of the 4 million shares of new common stock under a rights offering. The company had no bank debt.

NII ran into trouble when U.S. Trustee Donald Walton objected to the proposed plan on grounds that the company solicited votes for its approval after it filed for bankruptcy May 24.

"The conclusion is inescapable that the debtors were asking for the creditors' votes in soliciting signatures to consummate the lock-up agreements ... and have, in effect, disenfranchised every creditor except for their self-selected 'key players,'" Walton said in his objection. "The key players were, under the pain of injunctive relief, required to commit in advance to a position on a to-be-written plan without the benefit of the disclosure [statement] as required by law."

NII's unofficial bondholders committee, however, objected to Walton's motion.

"Contrary to the trustee's assertions, the lock-up agreements simply did not create any unconditional, irrevocable obligations to vote for the proposed plan and were not tantamount to votes, as the trustee alleges," countered the committee, which represents more than 99% of the company's unsecured debt.

Filings show that the committee cited support from 97% of the unsecured creditors in value and 84% in number for the reorganization plan.

NII filed for Chapter 11 after it defaulted on a $41 million interest payment on its 12.75% senior serial redeemable notes due 2010. It listed $3.26 billion in liabilities and $1.24 billion in assets as of Dec. 31, 2001.

A year-long effort to restructure failed, NII said, and Houlihan Lokey Howard & Zukin Capital Inc. was hired to shop the company prior to its Chapter 11 filing.

Evan Flaschen, Patrick Troftle and William Govier are NII's lead counsel at Bingham McCutchen LLP.

Thomas Kreller and Paul Aronzon in Los Angeles are lead counsel for the unofficial bondholders at Milbank, Tweed, Hadley & McCloy LLP while Gregory Werkheiser, Donna Harris and Robert Dehney are Wilmington co-counsel at Morris, Nichols, Arsht & Tunnell in Wilmington.

Todd Meyer and Dennis Meier in Atlanta at Kilpatrick & Stockton LLP are lead counsel for the official unsecured creditors committee while Mark Minutti is Wilmington co-counsel at Saul Ewing LLP. Paul Harner in Chicago at Jones, Day, Reavis & Pogue represents Nextel.

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