CitiCapital, the lead creditor for Burlington Telecom, the municipal telecommunications company, and the City of Burlington have failed to rework a financing deal on tens of millions of dollars in debt. CitiCapital will repossess the equipment as a result. However, before that happens the Vermont Public Service Board must approve any action that would significantly affect service. In the meantime, service will continue uninterrupted to BT customers. Burlington Mayor Bob Kiss issued the following statement Wednesday regarding Burlington Telecom’s negotiations with CitiCapital.
‘The City of Burlington has been in negotiations with CitiCapital to restructure its lease since early this year. The cornerstone of these negotiations has been a plan to utilize the positive cash flow Burlington Telecom is producing from regular operations to support a lease amendment. However, CitiCapital has been unwilling to make an accommodation the City could support.
‘As a result of this impasse, Burlington and CitiCapital have agreed that the equipment lease is terminated. Now that the lease is terminated, the City will obtain replacement equipment either through a partnership or other means, which will allow CitiCapital equipment to be de-installed and returned.
‘The City has requested a status conference with the Vermont Public Service Board to discuss this process in more detail as well as potential partnership opportunities to fund the replacement equipment and to propose a cure to the Board. Burlington Telecom is an important asset of the City. As always, Burlington Telecom is committed to providing continuing service to the residents and businesses who are its customers in the City of Burlington.’
Eleven private investors, most of whom were Vermonters, offered to buy Burlington Telecom. The offer was made to Bob Kiss and City Council President Bill Keogh shortly after the city announced that CitiCapital intended to repossess as collateral the equipment that's important to BT's operations.
The letter claimed that the group had made unsuccessful attempts since October to discuss a purchase of Burlington Telecom with Burlington consultant Terry Dorman and CitiCapital.
There was also a proposal offered to buy BT known as Reboot BT. This proposal was made in February by nine investors to help stabilize and secure the utility.
This year, Burlington Telecom has been unable to make interest and principal payments of approximately $1.5 million to CitiCapital this year.
CitiCapital loaned the utility $33.5 million in 2007, or about twice what some potential buyers believe the system is worth. BT's total debt is about $55 million. BT is under Public Service Board and court orders not to use public funds in order to repay the loan.
An earlier transfer of $17 million from city accounts to BT is currently under investigation.
Source: City of Burlington. 11.24.2010, 11.26.2010.
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Burlington Telecom ruled in violation of its CPG
Thu Nov 18 2010
The Vermont Public Service Board has found that Burlington Telecom is in "wanton" violation of its Certificate of Public Good as related to its borrowing $16.9 million from the City of Burlington and not paying it back, and for its failure to buildout the network by 2008. BT was challenged by the Department of Public Service, which acts on behalf of consumers, and was joined by Comcast. Comcast is BT's principal competitor in the city for high-speed Internet and landline television services. The PSB Order was filed October 8.
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