NC Telecom files bankruptcy

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Local services don’t expect interruption

RBC — NC Telecom has begun a bankruptcy bidding process with the highest bidder to become the new owner. But, in the meantime, customers of the high-speed Internet and digital wireless provider can expect business as usual.
“We anticipate no changes or interruptions,” said Rick Heming, general manager for NC Telecom. “It should be a smooth transition.”
A message on the company’s Web site offers the same reassurance: “Attention NCT customers. Today (July 8) our customers have begun receiving a required mailing regarding our bankruptcy process. We want to stress that there will be no service interruption and business is proceeding as usual.”
NC Telecom, which has an office in Meeker, and provides service to Rio Blanco County, with the exception of the Town of Rangely, filed Chapter 11 bankruptcy reorganization in October 2005. The next step in the process is a bidding auction.
“We recently filed a motion to have an auction, with CenturyTel as the opening bidder or stalking horse,” Heming said. “From a pool of bidders, (NC Telecom) chooses the stalking horse to make the first bid.”
CenturyTel’s opening bid was $1.3 million.
So, what exactly is the role of the so-called stalking horse?
“The stalking horse sets the bar so that other bidders can’t low-ball the purchase price,” according to Investopedia, an online dictionary of financial terms. “Once the stalking horse has made its bid, other potential buyers may submit competing bids for the bankrupt company’s assets.”
The hope, Heming said, is competition will push the bid higher.
“The goal is to get the most cash back for the creditors, at this sale,” Heming said. “We’re hoping to get the best value.”
Heming said CenturyTel isn’t the only potential new owner of NC Telecom.
“CenturyTel is one of several interested and qualified buyers,” he said. “And we expect at least two other parties to make bids. I can’t provide names, since they are operating under non-disclosure agreements.
“There will be a bidding process, but we don’t know (if the winning bid) will be CenturyTel,” Heming said.
CenturyTel, a Louisiana-based company that serves customers in 25 states, according to its Web site, currently provides high-speed Internet service to residents in Rangely.
“The likelihood that CenturyTel will be the winning bid is unknown and out of our control,” Heming said. “I think that CenturyTel would be a good steward of the NCT assets, and believe that they would offer a smooth transition for our current customers.”
Heming also couldn’t say whether the new owner would maintain an office in Meeker.
“The operational details of the Meeker office will be in the hands of the new owner,” Heming said.
Rio Blanco County government has a financial interest in NC Telecom, having provided more than $1 million in start-up money in 1999.
“The original agreement provided for services at no cost, with reduction of the prepaid balance as services were provided,” Heming said. “The new agreement — negotiated shortly after our filing in October 2005 — provides for 50 percent payment and 50 percent reduction from the prepaid balance.”
Heming said he expected the new owner would renegotiate with the county.
From the county’s perspective, Pat Hooker, county administrator, said he anticipates a smooth transfer to a new owner.
“I talked to Mike (Lani), our IT director, just to make sure, and he indicated we’re not anticipating any adverse issues,” Hooker said. “As far as I know, it will be business as usual for us. We expect an orderly transition through the whole process.”
Heming said, “I have had discussions with the county technology department to help ensure a smooth transition.”
“We had a sit-down (on May 28) with NC Telecom and a couple of gentlemen from CenturyTel, just kind of went over some of the scenarios of what may or may not happen,” Lani said. “It was a pretty straightforward meeting. They assured us there would be no interruptions in service, if there was some kind of switchover. They said they would continue to provide the same kind of residential and business service they are currently providing. We’re waiting to see how it shakes out in court to get a clear picture of who the players will be.”
As far as a timetable for the transfer of NCT assets to a new owner, Heming expects the process to move fairly quickly.
“The timeframe is open to speculation,” he said. “There is not a written timetable. But three months is within the range to prepare and begin an auction process.
“It looks like the court is fast-tracking this,” Heming said. “They (the court) want this done very quickly. Based on what I’ve seen, the auction will take place, definitely, before the end of the year. We’re at least 90 days out, I think, but it could be longer.”
NC Telecom’s total debt is in the $14 million-$15 million range, Heming said. The biggest creditor is Rural Utilities Service (RUS), a division of the U.S. Department of Agriculture, which was NCT’s primary lender. RUS has filed a claim in the amount of more than $12 million.
“The new owner will receive the assets (of NC Telecom) free and clear of all debt,” Heming said. “And the creditors are paid with the proceeds of the sale by the court. Contract agreements, such as those with the counties, can be assumed, modified or rejected, as part of the asset purchase.”
NC Telecom provides residential high-speed Internet service in Meeker, Craig, Steamboat, Hayden and Oak Creek, as well as business service to the same areas. Public entities, such as schools, libraries, county government and law enforcement, in Meeker, Craig and Steamboat, as well as the Colorado State Patrol hub for the western slope, located in Craig, also receive service from NC Telecom.
In the early days of NC Telecom, there was a waiting list to receive high-speed Internet service. Not so anymore, Heming said.
“When we started (in Meeker), we almost immediately sold out of loops for people who wanted a connection,” he said. “So we had a waiting list. Sometimes it took two or three weeks for a port to open up.”
For a while, NC Telecom was the only Internet service provider in the area. Later on, Qwest, another provider, moved into the area, offering the same service.
“Up until about three or four months ago, we had a waiting list,” Heming said. “It must have something to do with the service, because the Internet is all the same. I think it has to do with local availability. We have an office there (in Meeker), and we have people there. Meeker is the kind of town where that’s important.”
Throughout its history, NC Telecom has had an affiliation with UBET Telecom, a Utah company and the sole shareholder in NC Telecom. UBET later merged with UBTA (Unitah Basin Telecommunic-ations Association). UBTA is listed in the bankruptcy papers as one of the creditors of NC Telecom.
That affiliation will come to an end with the purchase of NC Telecom assets by a new owner.
“UBTA-UBET will have no affiliation with the new owner,” Heming said. “They currently operate in Colorado (as UBET Wireless) as a provider of cell services and that operation is separate from NCT and will not be affected by the (bankruptcy) proceedings.”
Even with the ongoing bankruptcy process, Heming remains optimistic.
“The asset purchase process is very encouraging, and I look forward to having a new owner that will optimize the use of the fiber assets and continue to provide enhanced services to our region,” Heming said.