Pareteum Corporation and certain affiliates (collectively, “Pareteum” or the “Company”), a global cloud Communications-Platform-as-a-Service (CPaaS) company, announced that the Company filed for voluntary protection under Chapter 11 of the U.S. Bankruptcy Code (“Chapter 11”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). The Company intends to execute a strategic asset sale under section 363 of the Bankruptcy Code while addressing legacy issues to best position the business for future success.
Prior to the filing of the Company’s Chapter 11 cases, the Company’s Board of Directors and management evaluated a wide range of strategic alternatives and implemented a strategic asset sale strategy. After a thorough marketing process to obtain a “stalking horse bidder” for a court-supervised sale process and as a result of arm’s length negotiations, Circles MVNE Pte. Ltd. (“Circles”) has combined with Channel Ventures Group, LLC (“CVG”) to execute a stalking horse asset purchase agreement for substantially all of the assets of the Company. Circles has agreed to acquire the Company’s Mobile Virtual Network Enabler (MVNE) business and associated contracts, and CVG has agreed to acquire the Company’s Mobile Virtual Network Operator (MVNO), IDM, iPass, and Small and Medium Business Enterprise (SMB) businesses and associated contracts. These agreements are subject to higher and better offers, among other conditions, as well as approval from the Bankruptcy Court.
The Company expects to continue operations as usual during the Chapter 11 process and complete the process in a swift manner. To help fund and protect its operations, Pareteum has received a commitment from Circles for up to $6 million in debtor-in-possession (“DIP”) financing. Upon approval from the Bankruptcy Court, the DIP financing, along with normal operating cash flows and the consensual use of cash collateral, will fund post-petition operations and costs under normal terms.
“Pareteum has faced numerous challenges in the last few years, especially in light of an increased cost of capital and the COVID-19 pandemic and has been working towards resolving legacy corporate issues while making progress to lay a foundation for future growth,” said Bart Weijermars, Pareteum’s interim Chief Executive Officer. “Despite our business challenges, our products and services that we provide to customers remain strong and relevant in this competitive industry. We look forward to using this process to position our business for sustained future success across our business lines. By taking today’s decisive and positive step, we are confident that under new ownership, the business can be best positioned for growth and to reach necessary scale and its full potential. In the meantime, we will continue to place the needs of our customers first, and I am thankful for everyone at Pareteum who works relentlessly to deliver top-tier products and services to our global customer base. I would also like to express my utmost sincere gratitude to our valued customers with whom we are honored to partner.”
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The Company has filed customary motions with the Bankruptcy Court intended to allow Pareteum to maintain operations in the ordinary course including, but not limited to, paying employees and continuing existing benefits programs, meeting commitments to customers and fulfilling go-forward obligations, including vendor payments. Such motions are typical in the Chapter 11 process and Pareteum anticipates that they will be heard in the first few days of its Chapter 11 cases.