NII Holdings Inc.
06/22/2021 | Press release | Distributed by Public on 06/22/2021 17:11
NII Holdings Announces Recovery of Amounts From Brazil and Mexico Escrows
June 22, 2021 -NII Holdings, Inc. ('NII') today announced that on June 14, 2021, NII recovered $6.5 million from the indemnification escrow account funded in connection with NII's sale of its Mexican operations (the 'Mexico Escrow Account') and on June 18, 2021, NII recovered $30.1 million from the indemnification escrow account funded in connection with NII's sale of its Brazilian operations (the 'Brazil Escrow Account').
Mexico Escrow Release
As previously announced, NII reached agreement with AT&T Mobility Holdings B.V., New Cingular Wireless Services, Inc., AT&T Holdings Mexico, S. de R.L. de C.V., and AT&T Comunicaciones Digitales, S. de R.L. de C.V. (collectively, 'AT&T') related to the amount of security needed to secure AT&T's contingent contractual claims in NII's dissolution proceedings (the 'Settlement'). The Settlement requires that funds will be released from the Mexico Escrow Account and the amount of security reserved in the dissolution proceedings will be reduced as seven Mexican tax audits are resolved. In addition, the first $3.0 million released from the New Escrow Account will be held by NII as additional security that may be available to AT&T in the event that the Mexico Escrow Account is exhausted.
Two of the seven Mexican tax audits were resolved and as a result, $6.5 million of the Mexico Escrow Account was released to NII on June 14, 2021 at the joint direction of AT&T and NII. Separately, $4.0 million of the Mexico Escrow Account was released to AT&T to fund a payment to the Mexican government related to the settlement of one of the other seven audits. As a result, $64.5 million remains in the Mexico Escrow Account. NII continues to work with AT&T and the Mexican tax authorities to resolve the remaining tax audits.
Brazil Escrow Release
On June 27, 2019, NII Holdings' stockholders approved the sale of its wireless operations in Brazil ('Nextel Brazil') to America Movil, S.A.B. de C.V. ('AMX'), pursuant to which NII Holdings and AI Brazil Holdings B.V. ('AI Brazil'), would sell their jointly-owned wireless operations in Brazil. On December 18, 2019, NII completed the sale of Nextel Brazil in accordance with the terms of the Purchase Agreement, dated March 18, 2019, by and among AMX, NII International Holdings S.à r.l. ('NIIH'), AI Brazil and NII (the 'Purchase Agreement'), as amended from time to time. Pursuant to the terms of the Purchase Agreement, $30.0 million of the net proceeds due to NII was placed into an 18-month escrow account to secure NII's indemnification obligations under the Purchase Agreement with AMX, with Citibank, N.A. as escrow agent.
As of June 18, 2021, AMX had not made any indemnification claims and as a result, Citibank, N.A., as escrow agent, released the entire balance of the Brazil Escrow Account to NII, in the amount of $30.1 million, which includes $0.1 million of interest.
Dissolution Update
As previously announced, on January 13, 2020, NII filed a certificate of dissolution with the Secretary of State of the State of Delaware. Further, on October 8, 2020, the Company filed a Verified Petition for Dissolution in the Court of Chancery of the State of Delaware (the 'Delaware Court'). In addition, on January 15, 2021, the Company filed a Motion for a Distribution to Stockholders and for Approval of Reserves (the 'Motion') requesting that the Delaware Court enter an order granting NII's request to make an initial distribution of $161.0 million (approximately $1.54 per share) to the Company's stockholders and to establish a reserve of $125.7 million for the Company's remaining known claimants and potential future unknown claimants.
Also, as previously announced, on March 22, 2021, the Delaware Court entered an Order Approving Notice and Certain Reserve Amounts and Barring Certain Claims (the 'Order'). The Order approved the reserves set forth in the Motion (including reserves with respect to AT&T and AMX), with the exception of the proposed $3 million reserve for potential unknown claims (the 'Unknown Claims Reserve'). On March 16, 2021, the Delaware Court entered a separate order appointing a guardian ad litem (the 'Guardian') to represent the interests of potential unknown future claimants. The Guardian has been charged with investigating the nature and extent of possible unknown claims, evaluating the sufficiency of the Unknown Claims Reserve, and evaluating whether a period of time longer than five years after the date of dissolution should be used for evaluating potential unknown claims. If the Guardian determines that the Unknown Claims Reserve is adequate, then the Guardian will submit a recommendation to the Delaware Court to that effect. If the Guardian, determines that the Unknown Claims Reserve is inadequate, then the Guardian may negotiate with the Company regarding an adequate Unknown Claims Reserve. If the Guardian and the Company cannot reach agreement, then the Guardian will litigate the question of an Unknown Claims Reserve on behalf of the potential unknown claimants.
While there can be no assurances with respect to the timing or outcome of the work conducted by the Guardian, all other reserves proposed in the Motion were approved by the Delaware Court in the Order, and therefore the Company expects to make an initial distribution once the Guardian's work is concluded and approved by the Delaware Court.
Furthermore, the Delaware Court may require NII to withhold an aggregate amount of security in excess of the $3 million amount originally proposed by NII for the Unknown Claims Reserve. In addition, NII cannot predict the impact, if any, of the Covid-19 pandemic on the timing of proceedings in the Delaware Court, and it is possible that delays could result. There also can be no assurance as to the timing or amount of any additional distributions that NII may make as part of the dissolution process.
Also, as a result of the above-mentioned escrow releases, the reserves approved by the Delaware Court with respect to AMX and AT&T have been reduced by $30.0 million and $7.5 million, respectively. Therefore, NII currently estimates that if the Delaware Court approves NII's request to make an initial distribution of $161.0 million to the Company's stockholders (and assuming that there are no changes to the Unknown Claims Reserve after the Guardian's review has been completed), the total amount available for distribution in the initial distribution will be approximately $194.8 million ($1.86 per share).
Based on currently available information and considering the impact of the foregoing escrow releases, NII currently estimates that the total amount of distributions will be between $2.41 and $2.60 per share. The low end of the range includes a reserve of $5.0 million for additional tax, accounting and legal costs, as well as potential personnel costs that may need to be incurred in connection with the dissolution process, and the $3.0 million Unknown Claims Reserve, which constitutes the Unknown Claims Reserve proposed by NII in the Motion, but remains subject to review by the Guardian and approval by the Delaware Court. The timing of distributions and ultimate amount distributable to stockholders will depend on factors outside of NII's control, including, among other things, the amount of cash recovered from escrow related to the sale of NII's operations in Mexico and the amount that the Delaware Court ultimately determines is reasonably likely to be sufficient for the Unknown Claims Reserve, and could vary from NII's current estimates.
About NII Holdings, Inc.
Visit NII's website at www.nii.com.
NII Holdings, Inc.
NII Holdings, Inc.
Arlington, VA 22202
Investor and Media Relations:
Tim Mulieri