83.9 F
Charlotte Amalie
Wednesday, May 25, 2022
HomeNewsArchivesPSC Hearing Aims to Uncloud Vitelco Financial Picture

PSC Hearing Aims to Uncloud Vitelco Financial Picture

Nov. 5, 2008 — With no public turnout, it was a long, quiet day of testimony about Vitelco finances Thursday during the first of three public hearings the Public Services Commission is holding as part of a mandatory phone-rate investigation.
The hearing was an information-gathering exercise, and no votes or actions were taken.
Vitelco parent Innovative Communications is in Chapter 11 bankruptcy proceedings, and Vitelco is slated to be sold to pay some of Innovative's debts. But efforts to sell these corporate entities have been complicated by both the global credit crunch and, locally, by the lack of clarity (for potential buyers) of the Vitelco rate structure. The sale was put off until late December and the PSC, working with the court-appointed Chapter 11 trustee handling Innovative's properties, has set up a schedule aiming to have new rates by Dec. 3, providing potential buyers with a clearer picture of the company's financial prospects and value over the next few years.
Wednesday's Vitelco witnesses were Don Parrish, an expert for Vitelco on rate of return, who calculated figures for Vitelco over a 12-month test period; David Blessing, an economist on what constitutes a proper rate of return; and Byron Smyl, the man overseeing ICC's corporate assets on behalf of the court-appointed Chapter 11 trustee.
Under Jeffrey Prosser, Vitelco's bankrupt owner, revenues went upstream to ICC from Vitelco, Innovative Cablevision, TV2 and the other subsidiaries of the parent company.
"It is our understanding at the commission ICC conducted a daily transfer of funds from its subsidiaries to ICC's consolidated accounts," said PSC attorney Boyd Sprehn, before asking Smyl, "Is this still happening?"
"No, each one has its own separate accounts now," Smyl replied.
Smyl said Vitelco is not asking for higher rates or any rate change, but is required by law to have a rate review now, and he wants to have a stable, predictable rate of return he can provide to potential buyers.
The PSC has oversight of utility rates, with a mandate to ensure rates are reasonable and non-discriminatory. Under V.I. Code, since 2001 the PSC must perform a rate review every five years on its regulated utilities. The last review for Vitelco was in April 2003, and the last rate schedule was approved in August 2003, so a new rate review is required by law.
The company is limping along.
"Would you describe Vitelco at the point you came in as a financially sound or a bankrupt entity?" Sprehn asked.
"I did not find it at that point financially sound," Smyl said. "To me, bankrupt is a technical term. The company was struggling and had serious liquidity problems."
"Would you describe it as presently financially sound?" Sprehn asked.
"I would say it is stable, but there is a ways to go before I would describe it as financially sound."
PSC Hearing Examiner David Nissman said Vitelco owes a substantial sum to an arm of the U.S. Department of Agriculture, the Rural Utilities Service. He asked Smyl how much was owed and how that debt affected Vitelco's financial footing and the sale prospects. (See "Prosser Adds 7th Lawyer As Assistant Jumps Ship.")
"RUS has about $55 million in secured debt from Vitelco," Smyl said. "They are the only secured creditor of Vitelco; none of ICC's creditor's has a lien on Vitelco. But RUS does have a claim on assets."
How to handle that debt?
"One option might be a credit bid by RUS," Smyl said. That would mean RUS could bid to buy Vitelco, using the sum it is due as part of its bid.
"Otherwise, RUS will be paid as part of the sale," he said.
Two more hearings are scheduled for Vitelco: at 1 p.m. Thursday in the St. John Legislative Conference Room and at 10 a.m. Friday on St. Thomas in the PSC conference room in Barbel Plaza. Testifying are Adam Dunayer, who is overseeing the auction and sale of Vitelco; Jeffrey Eisenach, an economist for Vitelco; and Keith Milner, who will testify about the condition of the network and discuss Vitelco's capital-improvement plan.
After the public hearings, former U.S. Attorney David Nissman, in his role as hearing examiner for the Vitelco rate investigation, will issue a report to the PSC Nov. 26 on proposed rates, according to a timeline presented recently in U.S. Bankruptcy Court. On Dec. 3, the PSC, using Nissman's report, will announce new rates. Then, on Dec. 17, Vitelco and other corporate properties of Prosser will be sold at a trustee-managed auction. On Dec. 19, the results of the sale will be brought before U.S. Bankruptcy Judge Judith Fitzgerald for her approval or rejection. That timeline may change.
Back Talk Share your reaction to this news with other Source readers. Please include headline, your name and city and state/country or island where you reside.

Print Friendly, PDF & Email
Keeping our community informed is our top priority.
If you have a news tip to share, please call or text us at 340-228-8784.

Support local + independent journalism in the U.S. Virgin Islands

Unlike many news organizations, we haven't put up a paywall – we want to keep our journalism as accessible as we can. Our independent journalism costs time, money and hard work to keep you informed, but we do it because we believe that it matters. We know that informed communities are empowered ones. If you appreciate our reporting and want to help make our future more secure, please consider donating.




Comments Box SVG iconsUsed for the like, share, comment, and reaction icons
This message is only visible to admins.
Problem displaying Facebook posts.
Error: Server configuration issue