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Starry Group Holdings, Inc. – Court Approves Bidding Procedures as Part of Debtors’ Aspirational “Dual Path” Restructuring Agreed with Senior Lenders, Sets April 24th Auction and May 3rd Sale Hearing


March 21, 2023 – The Court hearing the Starry Group Holdings cases issued an order: (i) approving bidding procedures in relation to the sale of substantially all of the Debtors’ assets and/or Reorganized Equity (the “Reorganized Equity”), (ii) authorizing the Debtors to enter into a stalking horse arrangement (none selected yet) and (iii) adopting a proposed auction/sale timetable culminating in an April 24th auction and a May 3rd sale hearing [Docket No. 185]. 

On February 20th, the Debtors filed their bidding procedures/sale motion, with that motion stating that the value of the Purchase Price included in a bid for all of the Debtors' assets and/or equity must equal at least $170.0mn (the “Minimum Qualified Bid”). If the minimum bid threshold is not met, the Debtors' restructuring support agreement (the "RSA") has them "toggling" to standalone plan of reorganization. As detailed below, extensive out-of-court sale efforts "did not yield any actionable results" with re-booted in-court efforts not now apparently coming with particularly elevated expectations at to achieving the lender-required $170.0mn benchmark price, the Debtors noting: "Based on certain feedback received in that process, the Debtors believe that some bidders may be willing to participate in greater depth in the competitive process the Debtors now seek to implement under the Bidding Procedures."

Case Evolution

On February 20, 2023, Starry Group Holdings, Inc. and 11 affiliated Debtors (“Starry Group” or the “Debtors”) filed for Chapter 11 protection noting estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn (the Debtors' third quarter 10-Q noted $270,649,000 in assets and $309,790,000 in liabilities as at September 30, 2022). At filing, the Debtors, a "growth stage" fixed wireless broadband internet service provider, noted that they "have generated losses and negative cash flows from operating activities since inception. The Debtors incurred a net loss of $166.5 million in 2021 and $215.9 million in 2022."

On February 23rd, the Court hearing the Starry Group Holdings cases issued an order authorizing the Debtors to (i) access $12.0mn in new money, debtor-in-possession (“DIP”) financing being provided by prepetition lenders and (ii) roll-up $15.0mn of prepetition "Tranche D Loans." The balance, of what is in total $43.0mn of requested new money DIP financing, is to be made available in two tranches; (a) $12.0mn upon issuance of a final DIP order (with consideration of that order now scheduled for March 22nd and (b) $19.0mn upon the earlier of a sale order or Plan confirmation order. 

The DIP financing is expensive, but clearly the only show in town; with the Debtors' predicament dire enough that investment bankers PJT did not feel it necessary to market the DIP in order to get comfortable that the proposed DIP was the "only option currently available to address the Debtors’ liquidity needs and create a pathway to exit from chapter 11…" Interest on the DIP is at 13% (plus a default rate of 5%) and fees include (a) a $3.0mn (@7%) commitment fee and (b) an 8% exit fee (on the new money, 5% on the roll-up, although exit fees are waived if the DIP converts to an exit facility).

Approved Key Dates

  • Bid Deadline: April 20, 2023
  • Commencement of Auction (if necessary): April 24, 2023
  • Deadline to file Notice of Successful Bidder: By 4:00 p.m. (prevailing Eastern Time) as soon as reasonably practicable after closing the Auction, if any, and in any event not less than 24 hours following closing the Auction.
  • Subsequent Sale Objection Deadline: April 28, 2023
  • Sale Hearing: May 3, 2023

Sale Background

The Bidding Procedures Motion

The motion [Docket No. 21] states, “The Debtors commenced the Chapter 11 Cases with a restructuring support agreement (the ‘RSA’) that allows them to pursue a ‘dual track’ restructuring designed to maximize the value of their estates. Having agreed with their fulcrum senior lenders on a standalone plan of reorganization, the Debtors are also pursuing a flexible, transparent, competitive marketing process as contemplated by the Restructuring Support Agreement.

The goal of the marketing process is straightforward: the Debtors want to ascertain whether any parties (1) would purchase their businesses as a whole at a price that exceeds their lenders’ minimum reserve price of $170,000,000 or (2) otherwise would acquire or invest in the Debtors’ reorganized enterprise on a smaller scale in a way that nets the best outcome for creditors. To that end, and consistent with the terms of the interim order the Debtors have proposed to approve their postpetition financing (including as it may ultimately be entered on a final basis, the ‘DIP Order’), the Debtors seek the Court’s approval of the Bidding Procedures, including a set of dates and deadlines that appropriately balance the need for an expeditious exit from chapter 11 with the Debtors’ duty to maximize value.

Marketing Efforts

The motion continues (see also the declaration in support filed by PJT at Docket No. 920 ): "As set forth in greater detail in the First Day Declaration, the Debtors’ marketing efforts long precede the Chapter 11 Cases. Before going public, the Debtors raised multiple rounds of venture and growth financing. Then the Debtors evaluated the possibility of becoming publicly owned through a ‘de-SPAC’ merger transaction, engaged in discussions with multiple potential SPAC partners and ultimately merged with the special purpose acquisition company FirstMark Horizon Acquisition Corp. in March 2022, thereby becoming publicly traded. That transaction involved sophisticated, well-advised parties on both sides and was predicated on thorough marketing and diligence processes. And just a few months afterward, the Debtors began further merger discussions with several potential strategic acquirers, which, in no small part, flowed from the marketing efforts and public awareness around the Debtors from the de-SPAC process.  

When it became clear that no merger partner was willing to transact, the Debtors engaged their investment banker, PJT Partners, Inc. (‘PJT’) to (a) assist the Debtors in analyzing and considering further financing alternatives and strategies, (b) assist the Debtors in identifying financial and strategic parties interested in participating in a transaction with the Debtors and (c) advise the Debtors as to potential mergers or acquisitions and the sale or other disposition of any of the Debtors’ businesses or assets.

After a review of these alternatives, the Debtors directed PJT to commence a process and pursue a potential transaction for the Debtors. Accordingly, over multiple months starting in October 2022, PJT engaged in communications with a number of parties regarding bidding for the entirety of the Debtors’ business. In total, PJT contacted 79 parties, 32 of which signed non-disclosure agreements regarding bidding, but this process did not yield any actionable results. Based on certain feedback received in that process, the Debtors believe that some bidders may be willing to participate in greater depth in the competitive process the Debtors now seek to implement under the Bidding Procedures.

Therefore, in order to maximize the value of their estates for the benefit of their stakeholders, the Debtors intend to continue marketing their assets and businesses postpetition as contemplated under the Bidding Procedures. Backstopping this process is the default resolution to these cases embodied in the Restructuring Support Agreement that the Prepetition Lenders will acquire all of the Debtors’ Reorganized Equity in full satisfaction of their claims under a plan of reorganization. Against that backdrop, the proposed Bidding Procedures are intended, among other things, to foster an open and competitive process to identify any higher or otherwise better bid(s) for the Debtors’ Assets and/or Reorganized Equity, whether constituting all or substantially all of the Debtors’ businesses or some portion thereof.

To that end and to ensure transparency for any interested bidders, the Prepetition Lenders have identified a reserve threshold that must be cleared by any bidder looking to purchase substantially all of the Debtors’ Assets or all of the Reorganized Equity under a plan (the ‘Minimum Qualified Bid’). If at least one Minimum Qualified Bid is received, an Auction will be conducted if necessary. Any other Bids, such as for specific Assets or in the form of partial plan sponsorship, will be evaluated by the Debtors in consultation with the Consultation Parties and qualified for Auction (if applicable) and/or ultimately accepted if determined to constitute higher or otherwise better offers, when considered in tandem with other prevailing proposals.

If the Debtors do not receive an asset-sale Bid for substantially all of the Assets that is at least the Minimum Qualified Bid, the Debtors will pursue confirmation of their plan of reorganization consistent with the Restructuring Support Agreement (although subject to any plan modifications that may result from activity and negotiations in the marketing process). Even in such a scenario, however, it is possible that the Debtors pursue a sale hearing pursuant to this Motion to seek approval under section 363 of the Bankruptcy Code for one or more discrete sales of less than all of their Assets.

The Debtors believe that the proposed Bidding Procedures and the related relief requested in the Motion will allow the Debtors to efficiently pursue a value-maximizing sale process and best position them to achieve their goals in the Chapter 11 Cases, including preservation of the Debtors’ operations as a going concern. The Debtors submit that the sale process has been structured to maximize bidder interest in the Assets and/or Reorganized Equity.”

About the Debtors

According to the Debtors: “At Starry (NYSE: STRY), we believe the future is built on connectivity and that connecting people and communities to high-speed, broadband internet should be simple and affordable. Using our innovative, wideband hybrid-fiber fixed wireless technology, Starry is deploying gigabit capable broadband to the home without bundles, data caps, or long-term contracts. Starry is a different kind of internet service provider. We’re building a platform for the future by putting our customers first, protecting their privacy, ensuring access to an open and neutral net, and making affordable connectivity and digital equity a priority. Headquartered in Boston, Starry is currently available in Boston, New York City, Los Angeles, Washington, DC, Denver and Columbus, OH.”

Organizational Chart

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The post Starry Group Holdings, Inc. – Court Approves Bidding Procedures as Part of Debtors’ Aspirational “Dual Path” Restructuring Agreed with Senior Lenders, Sets April 24th Auction and May 3rd Sale Hearing appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.

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