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Africa: Cash-strapped WorldSpace considering sale & leaseback

Cash-strapped satellite radio broadcaster is about to have its annual accounts “qualified” by auditors Grant Thornton, “expressing doubt about the Company’s ability to continue as a going concern based on its current financial resources”. WorldSpace is still scratching around for cash to stay afloat, and one option now under consideration is the sale and leaseback of its pair of satellites. It has also abandoned plans for the time being to launch its back-up satellite for Europe.

WorldSpace is out of money. Its Q4/2007 revenue numbers are pitiful, earning just $3.8m in subscriber and miscellaneous income. The end result was that it had cash (and cash equivalents) in its bank of just $3.59m, plus another $6.3m in securities ($27m and $143.7m same period 2006) as at Dec 31, and yet it is spending cash at a rate of almost $40m per quarter. Q4 saw an overall loss of $46m. In January this year it negotiated an emergency “bridging loan” of $40m from Yenura Pte, a company controlled by WorldSpace’s CEO (and Chairman and President) Noah Samara. However, $10m of whatever cash Samara actually doled out to WorldSpace had to be paid to preferential debt-holders, who are expecting another $17.5m to be paid this coming May (and another $17.5m in 2010).

The balance of this fresh $40m amount has not been fully “paid” over to the broadcaster. Samara, in a conference call on March 20 said “about half” had been paid across to WorldSpace, and the balance would be made available “in the next few weeks”. WorldSpace’s cash position and lack of progress in securing fresh funding means that the company’s accountants (Grant Thornton) will this week be qualifying their overall end-of-year accounts for WorldSpace and “expressing doubt about the Company’s ability to continue as a going concern based on its current financial resources”. WorldSpace had total operating expenses of $39.6m during Q4 (down on 2006’s $57.2m) showing that belts are being somewhat tightened.

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