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HomeNewsArchivesAT&T Pushing Ahead with Plans to Buy Centennial

AT&T Pushing Ahead with Plans to Buy Centennial

Feb. 26, 2009 — After a two-and-a-half hour executive session, Public Services Commission members spent much of their Thursday board meeting getting status updates on the pending sale of two local telecom companies.
AT&T is pushing to buy out Centennial Communications Corp. — a move that Centennial officials said Thursday would give its local customers access to a network with the "best" worldwide coverage, a broader range of wireless devises and the "nation's largest" wi-fi network, among other things.
"What's most critical to the U.S. Virgin Islands is that we will be better prepared to respond to natural disasters," said Jorge Bauermeister, Centennial's attorney. Bauermeister assured the PSC that Centennial plans to move ahead with "business as usual," particularly when it comes to keeping up with its five-year plan and using its federal Universal Service Funds to build facilities in the territory.
The USF is an FCC-controlled program designed to bring better telecommunications services to rural and insular areas. Funding is awarded based on conditions such as whether the money would be used to help subsidize local services, telecommunications infrastructure and building service quality. Centennial began receiving its funding about a year ago, after being designated an eligible telecommunications carrier by the PSC. (See "PSC OKs Federal Funding for Vitelco, Centennial.")
Under terms of the agreement, AT&T would acquire 100 percent of Centennial's stock at $8.50 per share, for a total equity price of $944 million. Including net debt, the total enterprise value is approximately $2.8 billion. The acquisition, which is subject to U.S. Justice Department and Federal Communications Commission approval, is expected to close out at the end of June, according to William L. Roughton, Centennial vice president of legal and regulatory affairs. (See " AT&T to Buy Centennial For Nearly $1 Billion").
Another significant deal is also making its way to the checkout counter: late last month, Innovative Communication Corp's biggest creditor announced plans to take the first step toward acquiring the V.I. Telephone Co. and other ICC assets.
The decision of the National Rural Utilities Cooperative Finance Cooperation to make a credit bid on Vitelco was publicly announced during a court hearing Wednesday, according to Byron Smyl, overseeing ICC's corporate assets on behalf of the court-appointed Chapter 11 truste. National Rural’s affiliate, Rural Telephone Finance Cooperative (RTFC), is the lender to ICC and holds a $525 million judgment against ICC, which has been in bankruptcy since July 2006. A credit bid is when a creditor bids for a property at auction, offering not cash, but the value of the debt owed it. (See "ICC Creditor Moves To Acquire Vitelco.")
The sale of those ICC assets "based predominantly" in the Virgin Islands was scheduled for mid-December, but got pushed back as harsh economic conditions raised financing issues for prospective buyers, Smyl explained Thursday. A deal was instead expected to come around in late February or March, he said.
"Around Jan. 29, RTFC, after reviewing the bids they had received, came to a decision that the valuation they were getting were not at a level that was going to attract them," Smyl said. A press release filed shortly after announced the corporation's plans to credit bid, and since then bankruptcy trustee has been working "diligently" with RTFC to workout the logistics, he added.
Vitelco's current chief executive officer, E. Clarke Garnett, has been asked to stay on board if the sale is approved. Garnett told PSC members Thursday that Vitelco's efforts to restore service to St. Croix in the wake of Hurricane Omar is pretty much complete.
"Although Omar was a fairly small, contained hurricane, it did some substantial damage — and we had multiple issues that arose from that, particularly with the cable television," Garnett said. "St. Croix is by far the island with the most technical issues and with that being the case, Omar chose to hit St. Croix — but that gave us the opportunity in certain parts of the island to take a situation that was really unconscionable and fix it properly."
Vitelco is also going to go after about $1 million in fleet financing from the Rural Utilities Service to beef up its force on the ground, Garnett added. The money is expected to come through within the next month, with the fleet to follow a few months after, he said after Thursday's meeting.
"We found a dealership that's willing to go for it," Garnett said. "The process started last February, so we hope everything can happen in terms of the financing in the next month or so. We're talking about specialized vehicles here, so they have to be built with all custom things we need, and we hope that will happen within the following two to three months."
PSC members present during Thursday's meeting were Joseph Boschulte, Donald "Ducks" Cole, Verne C. David, M. Thomas Jackson, Elsie Thomas-Trotman and ex-officio member Sen. Patrick Simeon Sprauve.

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