Wireless Internet service Starry filed for bankruptcy on Tuesday, seeking to reduce its debt load while continuing to operate in five cities.
The Boston-based company, which went public by merging with a blank-check company last year, said it had an agreement with its lenders for a pre-packaged Chapter 11 restructuring plan. Such an agreement can drastically reduce the amount of time a company spends in bankruptcy. Shareholders, who have seen Starry’s stock price drop from about $10 per share to a few pennies, could be wiped out completely.
The company has been slashing costs and pulling back from newer markets in an effort to conserve cash. Starry laid off half of its workforce in October and cut another 100 workers, about one-quarter of those remaining, in January.
“Over the last several months, we’ve taken steps to conserve capital and reduce costs in order to put Starry in the best position to explore various financing paths for the company,” Starry’s chief executive Chet Kanojia said in a statement. “Our next step in this journey is to continue to strengthen our balance sheet through a Chapter 11 restructuring process.”
As part of the bankruptcy process, Starry’s lenders have offered the company $43 million of new loans to continue operations. Starry said it is continuing to offer service in Boston, New York City, Los Angeles, Denver, and Washington, D.C. The company had 91,000 subscribers at the end of September.
“Given everything that had happened recently, there was concern about whether they could continue offering service,” said Mark Lowenstein, managing director in Boston at telecom consulting firm Mobile Ecosystem. “The good news for Starry is with this restructuring and financing it looks like they’ll be able to do so, albeit on a more curtailed basis.”
But the company still faces increasing competition in the market for home wireless Internet service, as Verizon and T-Mobile have moved aggressively to court customers with their 5G networks, Lowenstein said. “They had the market a little more to themselves for a period of time,” he said. “Now the competitive environment is going to be challenging.”
Starry’s merger with a special purpose acquisition company to go public in March 2022 came just as investors were souring on SPAC deals. The company raised less than half the amount of capital planned and, as its stock price declined, had difficulty raising further funds. An agreement with Cantor Fitzgerald’s CF Principal Investments LLC to raise as much as $100 million collapsed in January.
Unlike most wireless Internet providers, Starry designs its own routers and connectivity gear.
Aaron Pressman can be reached at firstname.lastname@example.org. Follow him on Twitter @ampressman.