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Prosser Appeals Latest Setback to Federal District Court

Sept. 10, 2007 — Jeffrey Prosser, owner of Innovative Telephone, has appealed his latest reverse in the U.S. Bankruptcy Court to the Federal District Court on St. Thomas.
A bankruptcy judge in Pittsburgh Friday gave a court-appointed official, the trustee, the power to control the holding company that runs the V.I. telephone and cable companies and other enterprises. (See "Judge Strips Prosser of Power Over Company Operations.")
The appeal, filed Monday, seeks not only the reversal of the control decision, but also of Judge Judith Fitzgerald's earlier order rejecting a discounted financial settlement that the creditors had successfully argued was no longer binding. That settlement was in the neighborhood of $402 million.
In their latest motion, Prosser's lawyers say the requested district-court decision was needed "to allow for successful reorganization and to prevent the dismantling of the new ICC enterprise and potential disruption of telecommunications service in the Virgin Islands."
They argued that the bankruptcy judge's decision would place in jeopardy the phone company's franchise, granted by the V.I. Public Services Commission.
At this writing, the other parties have not yet filed any cross-motions. These include the creditors, the Rural Telephone Finance Cooperative, which has lent close to half a billion dollars to Prosser over the years, and the Greenlight Companies, minority stockholders in the predecessor firm to another of Prosser's holding companies, Innovative Communication Company. Another possible respondent to the Prosser petition would be the trustee, Stan Springel, the West Coast executive granted additional powers on Friday.
The granting of their motion, according to Prosser's lawyers, would mean that "the debtors (i.e. Prosser and his firms) will be able to implement the financing and carry on their businesses."
The "financing" mentioned in the brief was discussed in some detail during the portion of last week's hearings in Pittsburgh that were open to the public. However, a few minutes apparently dealing with this subject were made confidential when the judge placed them under seal. An officer of the Rothschild Bank, Neal Augustine, was a witness at the hearing. Under cross-examination from the creditors' lawyers, he said the potential source of funding was Silver Point, which he did not identify further, and said that should the financing go through, Prosser would retain at least a 70-percent interest in the company.
The judge said she was not favorably impressed by an outcome which, "despite the fact that not a penny has been paid to the creditors," would leave Prosser with a 70-percent interest in the enterprise. The creditors also objected to the financing plan for similar reasons.
Silver Point is a Connecticut-based hedge fund that has "about $5 billion under management" and "focuses primarily on distressed debt," according to an Internet publication, Macau Business News. It is also involved in a $2 billion casino development in Macau, the former Portuguese colony near Hong Kong.
Apparently Silver Point insisted on the confidentiality of its financing offer. It is not a party to the bankruptcy proceedings, and the judge ruled that the details of its financing offer could remain secret. Earlier in these hearings she had ruled that most previously secret elements of the case would be made public, but said logistics were such that this would not happen immediately.
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