Burlington, Vermont - February 17, 2010
Wednesday was D-Day for Burlington Telecom-- the deadline to make a $386,000 interest payment on its loan. And so far it appears that will not happen.
WCAX News spoke with both the city's attorney, Ken Schatz, and Burlington City Council president Bill Keogh. Both said Burlington will be notifying its lender, Citi Leasing, that it will not be making the payment on time. But Keogh says that doesn't necessarily mean the city will be held in default on the loan-- a concern because the city does not want to lose its good credit rating. Keogh and Schatz confirmed the city and lender Citi Leasing are still negotiating, trying to work out a deal.
"The real question that comes to mind is how are they going to deal with this?" said Steve Shepard, a telecommunications industry analyst. "They've got a couple of options; the most obvious is they find a funding source. That doesn't seem to have happened, and I'm not sure they're going to. Because not only have they lost the confidence of the Public Service Board, and we know that from the very interactions they've had, they've also lost the confidence of the market. And that's a dangerous thing."
Shepard says that loss of confidence may create a difficult downward spiral for Burlington Telecom. It could turn off both potential customers and potential funders. But he says an outside investor may be the most realistic alternative. In other words, separate Burlington Telecom from Burlington.
"I know that's a politically not popular solution," Shepard said. "But one thing we could do is make it a standalone entity. Let a group of investors come in and take it over and run it as a company, not as a division of a city. That's what a lot of people are saying is perhaps the most viable option for them."
That begs the question of who would invest in something that appears to be losing money. Shepard says Burlington Telecom is a world-class telecommunications network and there may be an opportunity for the right investor to turn its finances around.
Mayor Bob Kiss and City Council President Bill Keogh issued a joint statement Wednesday, saying while they're disappointed in Tuesday's decision by the Public Service Board, they are committed to working through these issues. The city continues to consult with its financial advisers.
"The Blue Ribbon Committee on Burlington Telecom has made several recommendations about how to move forward," they said in the written statement. "All alternatives and options should be considered as we look to preserve Burlington Telecom and make it stronger into the future."
The mayor has not been physically visible on this issue here in Burlington. He is in Vancouver at a sustainability conference.
Kate Duffy - WCAX News
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