Otelco Files for Chapter 11 Bankruptcy in Delaware Court
By Joe Schneider & Phil Milford - Mar 24, 2013 7:29 PM ET
Otelco Inc. (OTT), a local exchange carrier based in Oneonta, Alabama, filed for bankruptcy protection in Delaware, after losing a contract with Time Warner Cable Inc. (TWC) which resulted in lower revenue.
Otelco listed assets of $168 million and debt of $310 million in the Chapter 11 documents filed in Wilmington, Delaware, yesterday.
“In addition to the loss of the TWC contract, recent rulings by the FCC will also negatively impact the company’s revenues,” Michael Weaver, Otelco’s chief executive officer, said in the court filing, referring to the Federal Communications Commission. “These two events will significantly reduce the revenue and cash flow.”
Otelco won support of creditors for a debt restructuring plan prior to the filing, the company said. Under the proposal, which must be approved by the bankruptcy court, Otelco will cut its long-term debt by half to $135 million from $271 million with secured creditors swapping current debt for new debt and shares in the company. Subordinated note holders will receive 92.5 percent of Class A shares in the company, Otelco said.
Otelco, formed in 1998, operates 11 local exchange carriers in Alabama, Maine, Massachusetts, Missouri, Vermont and West Virginia, also offering cable television and Internet services. It is often the only wireline provider of phone services in the rural areas, Weaver said.
The telecom provider faces competition from wireless phones supplied by major telecommunications companies including AT&T Inc. (T) and Verizon Communications Inc., Weaver said.
Otelco employs about 270 people.
The case is In re Otelco Inc., 13-10593, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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