In The News

$105 MM Personal Communications Sale Gets Green Light

Oct 14, 2013
The Deal Pipeline

Law360, New York (October 11, 2013, 2:47 PM EDT) -- A New York bankruptcy judge on Thursday approved the $105.3 million sale of Personal Communications Devices LLC’s assets to stalking horse bidder Quality One Wireless LLC, after the auction process failed to yield any other suitable buyers.

U.S. Bankruptcy Judge Alan S. Trust gave the nod to the PCD sale to Florida-based Quality One from the bench, after several other “seriously interested purchasers” were found to be unqualified, according to Quality One attorney Joseph J. Wielebinski of Munsch Hardt Kopf & Harr PC.

The judge’s approval of the deal is subject to a final written order agreed upon by the parties involved.

An eleventh-hour objection to the sale by AT&T Services Inc., which claimed the deal unlawfully terminated liability from PCD's contracts with AT&T, was also resolved, after Quality One agreed to assume all of AT&T’s contracts with PCD. Quality One also agreed to take over other PCD contracts with Sprint Corp. and Verizon Wireless, according to Wielebinski.

PCD has long contracted with AT&T to provide AT&T with wireless devices and accessories, according to court documents. As part of those contracts, PCD agreed to indemnify AT&T from any intellectual property or warrant claims brought against it over PCD's equipment.

AT&T had been initially concerned that Quality One would not be assuming all liabilities under the contracts, but rather would only assume liability for events or lawsuits happening after the sale closed.

Assuming a final order is entered, the sale is expected to close in a matter of days.

“Obviously Quality One is extremely pleased to be selected as the purchaser, and is looking forward to a prompt closure of the sale and a seamless transition,” Wielebinski said.

An attorney for PCD, Emanuel C. Grillo of Goodwin Procter LLP, likewise said the company was pleased to obtain approval for the sale.

"Many people contributed significant efforts over a long period of time to reach this conclusion," Grillo said. "The Bankruptcy Court provided the parties with the opportunity to get this done and as a result, once we close, the business will continue and people will remain working."

Hauppauge, N.Y.-based PCD, which acts as somewhat of a middleman between smaller mobile device manufacturers and U.S. carriers, sought bankruptcy protection in August, with a prepackaged plan to sell itself to Quality One.

PCD blamed a shift in the industry towards premium smartphones — a sector which has been dominated by Apple Inc. and Samsung Electronics Co. Ltd. — as well as CEO Philip Christopher's purported defection to a competitor.

Christopher recently challenged the company’s characterization of his departure, saying he was driven out by PineBridge Investments LLC, which, together with DLJ Investment Partners LP, controls 61.2 percent of PCD.

Primarily a supplier of nonpremium and niche handsets and wireless devices, PCD suffered an excess of inventory as device makers failed to meet sales targets and in 2012 was forced to liquidate much of its device holdings for markedly lower prices than projected, according to PCD Chief Financial Officer Raymond F. Kunzmann.

This and other financial strains led PCD to miss payments to vendors, some of which have sued in response, Kunzmann said.

PCD listed between $100 million and $500 million in assets and the same range in liabilities. It owes roughly $107 million to first-lien and second-lien lenders and listed its largest unsecured creditor as HTC America Inc., to which it owes $96.3 million.

Quality One is represented by Joseph J. Wielebinski of Munsch Hardt Kopf & Harr PC.

PCD is represented by Emanuel C. Grillo, Matthew L. Curro and Christopher Newcomb of Goodwin Procter LLP and Frank A. Oswald, David A. Paul and Leo Muchnik of Togut Segal & Segal LLP.

The case is In re: Personal Communications Devices LLC et al., case number 8:13-bk-74303, in the U.S. Bankruptcy Court for the Eastern District of New York.

By: Stewart Bishop; additional reporting by Emily Atkin and Maria Chutchian; editing by Richard McVay.