CAI Buys Some Breathing Room

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CAI Wireless Systems Inc., desperately in need of cash,
staved off a Feb. 20 deadline to pay $27 million to creditors after swinging several key
transactions last week.

Wireless cable operator CAI's strategic alliance with
Bell Atlantic Corp. proved to be a disaster, so it severed its remaining ties with the
telco as part of last Wednesday's deals. According to a report written by Gerard
Klauer Mattison analyst Jill Loesberg, CAI will end up with an additional $11 million in
cash, a new (and presumably friendlier) investor other than Bell Atlantic and a bigger
stake in CS Wireless Systems Inc., the wireless cable MSO that CAI co-founded.

But, Loesberg noted, CAI's cash position is still
critical. It needs to raise $45 million to pay back its new investor June 1, and it needs
around $150 million to pay for existing operations and to launch new digital systems.

Last week, CAI announced that it had issued $18 million in
new debt securities. It kept $11 million in cash and issued $7 million to the Bell
Atlantic affiliate, called BANX, that held stakes in CAI and CS. For that $7 million, BANX
terminated its business relationship with CAI and handed back a 9.9 percent stake in CS.

CAI chief financial officer James Ashman said the
company's plan is still to find a strategic partner to back its efforts to exploit
the wireless-cable spectrum with two-way services such as high-speed data and telephony,
in addition to video. He said CAI has disclosed having discussions with two potential
partners, but it has not named them.

In the meantime, with last week's deals, 'we
bought a little over three months' to keep looking, Ashman said. And with the BANX
overhang gone, CAI is better able to leverage its spectrum value with potential investors.

An unnamed CAI investor also bought, for an undisclosed
sum, BANX's stake in CAI, including preferred stock and warrants. BANX had invested
$100 million in CAI three years ago.

CAI then entered into a deal with its investor to swap the
former BANX securities for a new, $30 million subordinated note, due in 2003 with 12
percent accumulated interest. But CAI can redeem the note for just $3 million if it pays
up before June 1.

While CAI won't name the investor, published reports
have identified it as a Merrill Lynch & Co. affiliate.

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