4CableTV Completes Restructuring in Dynamic Broadband Sector

Friday, Mar 18, 2016

4CableTV (the “Company”) has emerged from a complex restructuring that will allow the private firm to focus on providing its innovative technology components to cable and broadband operators nationwide. Steven K. Richey, CEO, has owned and operated multiple cable systems and established the Company in Conway 12 years ago to develop new products and serve as a specialty solutions provider for the most challenging technical problems faced by major MSOs.

After completing a reverse merger into a public company in 2013 and taking on toxic debt to survive, the deal leaves 4CableTV in its original form as a private company, with the publicly traded structure and toxic debt removed, and preserves its longstanding core business. A private investment group will transition the publicly traded corporate vehicle to Port St. Lucie, FL.

The backdrop and impact. The dramatic growth by cable systems had already become a significant threat to broadcast networks by the mid-eighties. Upon formation, the Company quickly became known as a destination for “solutions of last resort” – taking on technical challenges that could not be solved in-house by the major and independent cable operators. Also, several proprietary product lines were developed within the Company and today it is known especially for “RF2F,” which extends the reach of cable systems, delivering high speed internet and television to previously unreachable homes: households in increasing need of hard wire high speed internet and which sit alongside, and at the end of, a cable axis from the head-end. This innovation allows major operators to offset subscriber losses and supplements new growth. This is important as major cable companies have recently been under pressure from competing modalities. Richey was inducted into the “Cable Pioneers” in 2011, an exclusive group that has delivered innovation and leadership to the industry over a period of at least 20 years.

The need for restructuring. In addition to managing the always shifting landscape in media distribution over the years, the Company also survived the global financial crisis and has maintained revenues up to the present. Like many companies and households, however, the Company suffered operating and structural wounds passing through the crisis. To repair the damage, the Company first completed a reverse merger into a publicly traded shell in 2013. This led to subsequent steps to continue business and protect shareholders, but left the Company with intractable and complex debt on its balance sheet by 2015. Despite continued revenues, the situation had become bleak and the Company could not address critical market needs: households just outside the reach of cable operators waited for accessi1, cable operators were losing subscribers and unable to spend capital for expansion, and the Company was forced to lay off workers.

1 Not just for entertainment, but increasingly, a need for high speed internet to avoid falling behind in non-entertainment sectors including healthcare and entertainment.

 A silent turning point. In late 2015 and after examining many possible ways out of what is often called a “death spiral” due to the type of convertible debt the distressed company had to take on, a comprehensive process was initiated. A small group - aligned with the shareholders of the public entity and with an interest in the survival of the private Company through meaningful holdings in both - decided to embark on a path that would require fortitude and functioning under sometimes severe stress. The group initially consisted of Richey, his co-founder Andrew Staniak, and a longstanding shareholder and colleague of Richey’s, Edward Cape, who resides in New York City. Cape owns and runs The Sapphire Group LLC (“Sapphire” hereafter), a private holding company that often assists distressed companies in the media, healthcare, and energy sectors. The group designed a plan that would require a sequence of delicate steps.

 Among the members of the group, they had extensive experience with the interdisciplinary nature of the target markets: the intricacies of corporate structure, the nature of public and private markets, broadband technology, lifestyle changes created by broadband proliferation, and financial economics. Over a period of four months, the group, with authority from the public company’s controlling shareholders, conducted ongoing negotiations with five different classes of creditors, with the goals of avoiding bankruptcy, protecting shareholders, and creating operating room for Richey and his staff to continue filling orders. After a short time, the Company had reached non-permanent but very cooperative agreements with its major creditors. The Company continued to operate using the temporary relief, supported by Cape and Sapphire, who maintained consistent communication with banks and attorneys representing multiple classes of debt-holders, and provided customized bursts of capital by providing a line of credit for the company. The process moved carefully forward, with the small group on the lookout for another entity with dovetailing interests.

Last week, the Company finalized documents and closed a structured deal with a private investment group of Port St. Lucie, Florida. In the deal, which closed on March 10, 2016, 4Cable TV (the original private South Carolina company) will seamlessly continue operations in Conway, SC, and return to private company status with a healthy balance sheet. Simultaneously, the private investment group will move the publicly traded vehicle to Port St. Lucie, FL, where it will soon begin independent operations. Renewed growth is anticipated for both firms. In conjunction with the deal, Mr. Richey has resigned his position as CEO and Director of the publicly traded entity, “4Cable TV International” (“ticker” CATV), and will immediately resume executing his duties as CEO of the private Company in Conway, SC (“4Cable TV”). Richey has agreed to serve for a period of six months as a consultant to the new CEO of CATV in Florida. The overlapping names will be reconciled subsequently.

 The revitalized South Carolina Company will keep its facility and operating assets in Myrtle Beach via a private exchange with the investment group; this was effected by individuals holding certain controlling preferred shares in CATV exchanging them to retain key operating assets in the private manufacturing company. Reporting from the public company on its operations will be provided as they deem appropriate. All individuals mentioned in this release still hold meaningful blocks of publicly traded shares in the Florida company, which aligns interests and encourages support for the ultimate trajectory its management chooses. Each also has significant ownership in the private 4CableTV: in particular, co-founders Richey and Staniak hold controlling positions, Cape/Sapphire will continue to hold a meaningful position and is under 19.9%, approximately mid-way between 10% and 20% (4Cable TV does not disclose quantitative data). Cape will join the Board of Directors of the South Carolina Company and continue to work with Richey on strategic and governance matters, and in addressing the critical issues in the broadband sector described above. This longstanding relationship arises from overlapping strategic interests between the Company and a diversified New York Media company controlled by Cape. Richey will be a shareholder in the New York Media company, also private, and with details to be disclosed later in its documents.

 4Cable TV of Conway, SC looks forward to delivering continued innovation at this critical period of national broadband development, providing educational opportunities for the broadband workforce, and adding local jobs to the community as it resumes growth.


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