Wave Sues Millennium for Backing Out of Sale1/24/2007 10:00 AM Eastern
Wave Division Holdings filed a lawsuit in King County Superior Court in Washington seeking to force Millennium Digital Media to honor its 2006 agreement to sell about 70,000 subscribers in Washington, Oregon and Michigan to Wave or to allow the Kirkland, Wash.-based company to overbuild the systems.
Wave had an agreement to buy about 70,000 subscribers in the three states for $157 million. But according to the suit -- first filed in October and then amended in December -- Millennium reneged on the deal after some of its debt holders thought they could get a better deal.
No court date has yet been set concerning the suit.
According to the suit, Wave first began negotiating with Millennium in 2005, reaching a deal to acquire the systems Feb. 8, 2006. But soon after that deal was signed, Wave claimed that Millennium began dragging its feet, failing to seek immediate approval of the transaction.
The buy was expected to be sort of a homecoming for Wave chief executive Steve Weed, who ran the Seattle system for Millennium before striking out on his own in 2002.
Wave claimed that the reason behind the delay was that Millennium’s high-yield bond holders had begun talks with Millennium to either acquire the assets Wave had agreed to buy or sell them to a third party.
After being provided “active assistance” by Millennium, the bondholders then approached Millennium’s senior creditors and purchased all or a portion of its senior debt. According to the suit, this elevated the former junk-bond holders to a senior-secured creditor position with security interests, liens and encumbrances on the systems.
“The purchase of the senior debt was effectively a sale of the system assets and violated the asset-purchase and unit-purchase agreements as it transferred control of the assets to a different entity,” Wave claimed in the suit.
After securing its new position, the junk-bond holders then objected to the sale of the assets to Wave, believing they could get a higher price from another party. The sale agreement was terminated July 28, 2006, according to the suit.
Now, according to the suit, the junk-bond holders are attempting to gain control of Millennium, proposing a debt-for-equity swap that would effectively be a sale.
In the meantime, Wave notified Millennium that it is considering overbuilding the very systems it believes it had bought. Millennium objected to the proposed overbuild, claiming that it violates its original agreement.
According to the suit, Millennium asserted that Wave’s obligations under the agreement remain in full force and effect and Millennium would retain its full legal rights.
Wave is asking the court to either force the sale to go through or to allow it to overbuild the Millennium properties. Wave is also asking for unspecified damages and court costs.
Weed declined to discuss details surrounding the suit. “We believe we had a binding purchase and sale agreement,” he said. “We are pursuing our rights to acquire the system.”
Millennium senior vice president of marketing Peter Smith did not return a call for comment.