Last week we reported that Worldspace's India subsidiaries and assets are specifically excluded from the company's Chapter 11 bankruptcy protection, and were continuing to trade. 18 months ago Worldspace was promising to invest $150m in India. Worldspace filed for Chapter 11 bankruptcy protection, at least for its US operation and AfriStar/AfriSpace satellite, on Oct 17. However, it is also a fact that Worldspace has pledged all of the assets of the company, "including the AfriStar satellite and interest in the spectrum rights," according to Worldspace, to its many debt-holders. But one must ask what has happened to Worldspace's other entities, including its business registered in the British Virgin Islands? On Oct 22 Worldspace India announced it planned to offer mobility and new products and services. A statement said it will exploit its fairly new ‘1Worldspace' logo, cut subscriber fees and include options such as ‘lifetime prepaid' payment method, which might seem a risky undertaking to some. However, Worldspace by its own admission owes money to several Indian companies such as music royalty agency Phonographic Performance, Indian space research outfit Antrix, BPL Technovision (a supplier of satellite receivers), Epigon Media Technologies and Lepton Software Export & Research. On Oct 24 it was reported that at least some of Worldspace's India creditors were considering mounting a joint legal action to recover debts from Worldspace. "We are waiting for some kind of communication from the committee. We are also talking to other Indian companies who are affected by WorldSpace to see if we can take a combined action. We plan to file a case against the company. We have just approached a law firm in Bangalore, Mumbai and Washington to see how we can recover our money," an official with BPL Technovision told Indian publication TelevisionPoint. Worldspace has some 175,000 subs in India, and local MD M Sebastian claims Worldspace's India operation is now at cash flow breakeven. "But we can move in an aggressive manner towards customer acquisition and new level of services once the restructuring in US happens," he said. Usually businesses that are at - or even close to - cash-flow breakeven find it easy to borrow fresh cash. After all, they are close to profit, so why wouldn't a bank, or an individual, or another company, invest money in a near-profitable venture? However, one must ask whether a legal action from its India suppliers and service providers would even be necessary if Worldspace had paid its bills on time. Worldspace Inc last week obtained its first slice of the pre-agreed $13m ‘Debtor in Possession' (DIP) funding in the shape of a $2m loan in order to pay pressing bills, not least staff salaries and fees to its company doctors, Quest Turnaround Advisors. Last week Judith Pryor, Worldspace's hard working SVP for corporate affairs, told a local Maryland publication that Worldspace had let go 90 staff over the past couple of years and now was managing with "about 50". Given that Worldspace had received a pair of $200,000 loans during 2007 from local government initiatives and in order to create local jobs it is likely that these will also have to be repaid. We hope for the sake of staff - and creditors - that they get what is rightfully theirs. They have worked hard for Worldspace and should receive their due. But we also hope that much the same happens to Noah Samara. Through public statement after public statement he has over-promised and wholly under-delivered to Worldspace's patient shareholders. Quite how Samara can be judged a fit and proper person to run a phone booth is beyond us. One might ask whether it is time that he received a thorough examination of his business dealings. Shareholders bought in to Worldspace as a result of the company's August 2005 IPO, and bought shares at $21 each. Some have joined in a Class Action against Samara and other executives of the company. But here's Mr Samara's own words: "We expect solid progress moving ahead. Italy, Germany, UK, Spain and France offer a market in our estimate of some 9m subscribers for Worldspace in the medium term, and a long-term estimate of 31m subscribers." This statement was made not in 2005, 2006, or 2007, but in March this year. Or how about this: "I can share with you that we are talking to a number of parties. Some of these discussions, if concluded, have the potential to take the company to its next phase. At the parent level the discussions are with strategic investors who either have a strong interest in one or more of our markets, or are interested in asset-based financing such as the sale of our assets and then a leaseback. At the regional and local level there are a number of discussions going on. In Italy, we and our partners are in discussions with a major financial institution. In India, we are talking to a potential strategic investor. In another market a local strategic investor has expressed strong interest in closing a transaction in that market once funding is raised at the parent level." Again from Samara's end of 2007 review statement, delivered in March this year. What happened to all these potential partners? Much of Worldspace $2bn-worth of spectacular debt is because of a royalty obligation to Stonehouse Capital entered into in September 2003, and subsequently frequently amended with the 4th amendment in Feb 2006. Storehouse is a Cayman Islands business controlled by the two sons (Abdulrahman Bin Mahfouz and Sultan Bin Mahfoz) of Khaled bin Mahfouz, the former COO of scandal-hit bank Bank of Credit & Commerce Int'l (BCCI). Bin Mahfouz co-funded WorldSpace at its inception, along with Mohammed Al Amoudi, another Saudi citizen. While Stonehouse is Cayman Islands registered, the Post Office box for all formal communications connected with its Worldspace deal is in Jeddah, Saudi Arabia (and care of Al-Murjan Organisation). The original plan was for Stonehouse to get a 10% slice of any pre-EBITDA earnings made up to 2015. Not profits, you'll note, but total earnings. Samara himself loaned Worldspace around $20m in July this year from Yenura Pte Ltd. Yenura is a company especially formed to invest in WorldSpace, and Mr Salah Idris, through his ownership of non-voting shares, holds all the economic interest in Yenura. Mr Idris is a Saudi Arabian businessman although originally comes from the Sudan. Mr Idris, an accountant by training, had the good fortune to be employed by the Bank of Credit & Commerce Int'l as its manager of international accounts, and reportedly when the bank failed (according to the Washington Post) "ended up a very rich man". One could also ask where Samara's cash has come from? His salary these last few years was some $650,000 p/a, plus more often than not a 95% bonus (he controls the company after all) plus $2.5m of stock option grants per year. Not bad for a business that has never, ever earned a profit. These people are not the only apples in the Worldspace barrel. The US Department of Justice Jan 8 this year unveiled the names, previously kept secret, of some key players in a 16-count case involving public corruption allegations in New Orleans and specifically against a Democratic member, representative William Jefferson. Our interest is focussed on "Business Person A", as the Court papers listed. The Judge looking after the case ruled that the "business person" could be named - and it is Noah Samara, CEO at WorldSpace. It seems WorldSpace signed a contract discussed or negotiated through Mr Samara with Mrs Jefferson on behalf of her ANJ Group in 2002 for help getting satellite transmission services into three African nations. Samara, according to the Justice Department statement, informed investigators in the case that Rep. Jefferson had pressed him to sign a contract and that he believed it was a bribe solicitation. Judith Pryor, spokeswoman for WorldSpace, told local press earlier this year that Mr Samara and Worldspace have been cooperating with federal investigators. In some respects our anxieties are that Worldspace will end up getting access to fresh funding, and that Mr Samara will again end up in control as he conjures up another Houdini-like escape. But fresh investors should realise that AfriStar and AsiaStar are now very aging satellites. Afristar (built by the then Matra Marconi company was launched on October 28 1998 and with a design life of some 15 years (to about 2013). A 1999 report talked about a problem with one of its two payload interface units, and by 2006 numerous reports circulated that Afristar 1 had a solar panel defect (not unusual on some Matra-built satellites) "and would need replacing by the end of the decade". Worldspace itself in its FCC application to reconfigure the existing ‘ground spare' satellite (designed and built for the South American market, and in storage) and now dubbed Afristar 2 said it was needed as an urgent replacement, and part of a longer-term and two-phase replacement strategy which included a 3rd satellite which would be launched "before Afristar 1 is fully retired". The cost of refurbishing Afristar 2 were put - in 2006 - at $40m plus another $70m to launch, plus insurance. Those plans seem now to have been junked and under the current financial regime seem impossible to contemplate. There are two theories currently floating around as to Worldspace's future: One is that the US government will buy the assets and use the frequencies to deliver C&W music to its overseas troops! No, that isn't quite serious, but a government entity could find the bandwidth very useful. Theory Number 2 is that the capacity could be used to beam religious broadcasting to the world, and there are plenty of radio-evangelists out there who would happily fund a pair of satellites beaming religion into darkest Africa, the Middle East, China and India.