GlobeTel Declares Formal Default by Internafta
FORT LAUDERDALE, Fla.--(BUSINESS WIRE)--May 1, 2006--GlobeTel (AMEX:GTE) today announced that on Tuesday, April 25, it instructed its lawyers in Moscow, Cleary, Gottleib, Steen & Hamiliton, to prepare and subsequently to deliver to LLC Internafta a formal Default Notice relating to the Agreement signed between GlobeTel and Internafta on December 29, 2005.
In accordance with the terms of that Agreement, Interafta was obligated to pay to GlobeTel, in January 2006, the first US$150 million instalment as called for in the Agreement. No payment was forthcoming from Internafta, at which point Internafta requested additional time to deliver funds and GlobeTel granted an extension.
Internafta subsequently delivered to GlobeTel terms of a US$300 million Letter-of-Credit on Banco do Brazil letterhead. It was thereafter determined by GlobeTel that the terms were not acceptable to any of GlobeTel's bankers.
Subsequent meetings between GlobeTel and the principals of Internafta, including Internafta's Director General, Maxim Chernizov, resulted in Internafta's repeated assurances and public statements that it was working with its syndicate of banks to deliver the required funding. In the context of these developments, GlobeTel issued several updates to its shareholders stating that it continued to attempt to work in good faith with Internafta in order to support its banking initiatives. In this regard, GlobeTel's management team produced a highly detailed, 108-page business plan (an expansion of the earlier business plan which it had submitted to Internafta during the competition for the Russian network installation) designed to support Internafta's pricing and structuring negotiations with Internafta's banks.
Internafta was given an additional period to work with its banks in order to give the transaction every possible chance of success. However, Mr. Chernizov was repeatedly advised that GlobeTel would be forced to call Internafta into default unless some written confirmation of the availability of funding were forthcoming before mid-April. As of mid-April, in spite of continuing assurances to the present day, Internafta has failed to provide clear, incontrovertible evidence of its ability to meet its funding obligations. GlobeTel has indicated to Internafta a willingness to consider an alternative funding structure in order to reduce the quantum of the installments (while increasing the number of installments) in order to lower the funding thresholds imposed upon Internafta.
At this stage, therefore, GlobeTel feels it has pursued every possible avenue to assist Internafta in curing its default. Thus, it elected last week to formally conclude further efforts to salvage the Internafta transaction and to open itself up to new negotiations with other significant parties in Russia, including an important entity that has approached GlobeTel, regarding a wireless network installation in Russia.
CEO Timothy Huff stated, "I firmly believe that GlobeTel has acted properly and appropriately throughout this process, and in accordance with the best interests of our shareholders. To have ignored this huge, company-transforming opportunity -- after having competed for the business in the presence of an array of senior Russian government officials including senior members of the Russian Parliament, Geoscan, MIG (the Russian government's aerospace company) and Rosonboroexport (the Russian government's agency for military imports) -- would have been deemed by our shareholders to be evidence of a timid, uncertain and uninspired management team. I believe that just the opposite is the case: GlobeTel's Directors and Officers are, in fact, assertively focused on producing shareholder value. And, while I naturally regret the time spent and the distraction caused by this situation, the company has incurred very modest expense on it, and now we will be much better positioned to pursue and achieve the performance targets cited in my recent statement to our shareholders. We have never been better positioned to achieve profitability and every one of our officers and employees is focused on and committed to delivering on the goals cited in our press release dated April 10, 2006."
It's too bad they couldn't come up with the money some how...seems like they may have been getting a very good deal.
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