March 1, 2021 – MobiTV, Inc. and one affiliated debtor (“MobiTV” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 21-10457 (Judge not yet assigned). The Debtors, who provide end-to-end internet protocol streaming television services (“IPTV”), are represented by Mary Calloway of Pachulski Stang Ziehl & Jones LLP. Further board-authorized engagements include (i) Fenwick & West LLP as general bankruptcy counsel, (ii) FTI Consulting, Inc as financial advisors and investment banker and (iii) Stretto as claims agent.
At filing, the Debtors note between 200 and 1,000 creditors; estimated assets between $10.0mn and $50.0mn; and estimated liabilities between $50.0mn and $100.0mn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Rackspace ($4.0mn convertible note claim), (ii) Silicon Valley Bank ($3.1mn PPP loan claim) and (iii) MPEGLA ($2.9mn licensing fees claim). As of the Petition date, the Debtors estimate that there is approximately $15.0mn in general unsecured claims relating to trade debt.
The Stevens Declaration (defined below) adds as to assets/liabilities and overall financial performance: "As of the Petition Date, the Company had total assets of approximately $19 million and total liabilities of $75 million. In calendar year 2020, the Company generated approximately $13.5 million in revenue, resulting in an operating loss of approximately $34 million. The Company derives its revenue from contracts with its subscription television customers, T-Mobile, and certain other broadband and cellular service providers, who utilize the Company’s IPTV Application."
In a press release announcing the filing, the Debtors advised that: “MobiTV intends to use these proceedings to implement a restructuring process which will position the Company's operating platforms for long-term sustainability and growth. The Company is committed to working with its lenders and stakeholders towards a speedy and successful resolution of the case….After thoroughly evaluating all strategic alternatives, the Board of Directors unanimously agreed that pursuing a restructuring through a formal chapter 11 process is a necessary step forward for the business."
In a separate statement, the Debtors' CEO Charles Nooney added: "We anticipate that the restructuring will take a period of months and that it will be completed in the second quarter of 2021."
DIP Financing
MobiTV has received a commitment for a $15.5mn new money debtor-in-possession ("DIP") financing facility that will "support the Company for the duration of the restructuring process, providing MobiTV with the financial runway and flexibility to execute on a value-maximizing solution, which may include a going-concern sale under section 363 of the Bankruptcy Code." The junior (only as to the Debtors' prepetition senior facility) secured multi-draw term loan will come from TVN Ventures, LLC, an affiliate of prepetition bridge loan lender T-Mobile, and is to provide the Debtors with $7.5mn of financing from the issuance of an interim DIP order. Interest is at 12% and there is no roll-up.
Goals of the Chapter 11 Filings
The Stevens Declaration (defined below) provides: "The Company ultimately concluded that given the significant challenges in achieving positive free cash flows in the near term, the business likely would not be viable on a stand-alone basis absent a strategic transaction. Further, in light of the Company’s most recent marketing process, and the desire of potential acquirers to purchase the Company’s assets free and clear of any liabilities, the Company believed it would be unable to consummate a strategic transaction out of court – especially given its limited available liquidity."
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filing (the “Stevens Declaration”), Terri Stevens, the Debtors’ Chief Financial Officer, detailed the events leading to MobiTV's’s Chapter 11 filing. The Stevens Declaration points the finger at the COVID-19 pandemic without providing any further support for that contention, but also notes longterm loss-making efforts and a 15th amendment to a senior credit agreement that was initially scheduled to mature in February 2019.
The Stevens Declaration states: “Despite growing revenue and increasing subscriber and customer bases, the Debtors have been incurring substantial operating losses. As set forth above, the Debtors generated a net operating loss of approximately $34 million in calendar year 2020. Although the Company projected significant and material subscriber and revenue growth for 2020, the COVID-19 pandemic and related stay-at-home orders, materially impaired the Company’s growth opportunities. As a result, the Company found itself with limited liquidity and at risk of default under its debt agreements. On August 6, 2020, the Debtors and Ally Bank entered into that certain Fifteenth Amendment to Loan and Security Agreement, dated August 6, 2020 (the ‘Fifteenth Amendment’), which provided for a limited forbearance on the Prepetition Loan Facility. In exchange for this forbearance, the Company was required to engage in good faith efforts to raise additional capital from the sale of equity or through new financing in a sufficient amount to repay the Debtors’ obligations under the Prepetition Loan Facility. .”
Marketing Efforts
The Stevens Declaration adds: "Despite the commencement of these chapter 11 cases, the Company fully intends to continue to run an extensive marketing process. With the Company’s continued employment of FTI, whose marketing strategy will include reengaging parties who originally showed interest in the Company’s assets in addition to new potential buyers, the Company is hopeful that such efforts will result in securing a purchaser of the Company’s assets and possible stalking horse bidder.
Accordingly, shortly hereafter, the Company will file a sale procedures motion to establish a formal marketing process designed to maximize the value of the Company’s assets. In connection therewith, the Company contemplates a robust marketing process followed by an open auction. The Company will also seek authority to enter into a stalking horse bid and designate a stalking horse purchaser in the Company’s business judgment (after consultation with the DIP Lender, the Prepetition Lender, and any official committee of unsecured creditors, as applicable) up to and including 7 calendar days prior to the bid deadline. This optionality will allow the Company to continue to work towards securing a stalking horse bid as a backstop to the sale process, while enabling the process to proceed as efficiently and economically as possible."
Significant Shareholders
- Oak Investment Partners XII, Limited Partnership: 44.48% common stock; 45.00% Series AA convertible preferred stock;45.00% Series BA convertible preferred stock
- Winnie So: 17.36% common stock
- Ally Commercial Finance LLC: 27.50% Series BA convertible preferred stock
- Homathko River Partners, LLC: 27.50% Series BA convertible preferred stock
- Limestone Ventures Holdings, LLC: 13.12% Series AA convertible preferred stock
About the Debtors
According to the Debtors: “MOBITV is a creative thinking technology company making TV better. Our mission is to create a video platform that makes it easy to watch the content you love regardless of how the market changes. We power a fully IP-based approach and, in combination with the almost two decades of expertise in IP video delivery, operators can finally make the switch to a truly future-proof TV solution.
The Stevens Declaration adds: "Founded in 2000, the Debtors are the first company to bring live and on-demand television to mobile devices and are a leader in application-based television and video delivery solutions. More specifically, the Debtors provide end-to-end internet protocol streaming television services (“IPTV”) via a proprietary cloud-based, white label application (the 'IPTV Application'). The IPTV Application is fully customizable, allowing the Debtors’ customers, generally television operators, broadband providers, and cellular device carriers, to provide a fully branded and customized video streaming platform on retail devices such as Roku, Apple TV, Amazon Fire TV, Xbox, and smart TVs, as well as other devices utilizing Android and iOS operating systems to their subscribers.
In support of the IPTV Application, the Debtors have secured certain transportation rights (the 'Transportation Rights') by which the Debtors provide content through the IPTV Application from over 375 leading video content providers such as HBO, Fox, the Walt Disney Company, Viacom, NBC, CBS, and others. The Transportation Rights held by the Company, coupled with the IPTV Application, simplify the content sourcing and delivery mechanics required to provide high quality streaming services to consumer end users through a single application feed, and significantly reduce the costs of the Company’s customers to provide content to their subscribers.
In this regard, the Company holds key contracts with T-Mobile USA, Inc. (“T-Mobile”) and over 120 cable/broadband television (also referred to as 'pay TV' or 'premium television') providers to deliver streaming content to over 300,000 end-user subscribers via business customer-specific branded iterations of the IPTV Application.
In support of the Debtors’ operations and IPTV Application, and as of the Petition Date, the Debtors utilize the services of approximately 86 employees in critical functions such as engineering, sales and marketing, operations, and back office and administrative positions. Most of the Debtors’ employees are based in the Company’s Emeryville, California headquarters. The Debtors also utilize the services of eight independent contractors and certain staffing firms based in India.
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