BREAKING: City secures refinancing for Burlington Telecom
Usually politicians save their 4 p.m. Friday press conferences for bad news. But this fire has burned unchecked for long enough.
Burlington Mayor Bob Kiss announced late this afternoon that the city received a financing proposal this week for Burlington Telecom (BT) to satisfy its current debt of $33 million, as well as the $17.4 million borrowed but never repaid from the city's pooled cash account. This "letter of engagement," from the Minneapolis-based financial firm Piper Jaffray & Co., is currently under discussion by the Board of Finance, and further discussion will most likely be the main event at Monday night's City Council meeting.
"BT's ability to meet its current debt obligations is an indication of its strength as an enterprise," Kiss told a room full of reporters late Friday. "It also confirms that the use of pooled cash has not been, and is not, an increased risk to the taxpayers of Burlington."
As Shay Totten first reported in late September, Chief Administrative Officer Jonathan Leopold floated the fledgling municipal telecom company a $17.4 million loan without the express written consent of the city council. Leopold fully expected the money would be repaid by outside investors within 60 days, he said later. But as the global economy tanked, those deep pockets never materialized, and Leopold came under fire from city councilors and the Department of Public Service for never fully disclosing the loan.
For his part, the CAO announced this afternoon that this financing deal brings the city "into full compliance" with Condition 60 of BT's Certificate of Public Good, which states that any money borrowed from the city's pooled cash account must be repaid within 60 days. He also said that the proposed financing structure will defer BT's repayment of principal and interest for somewhere between one year and 30 months. This deferral of debt service, he added, should leave BT with enough cash to continue hooking up new customers "to ensure that Burlington Telecom is cash-flow positive."
The terms of the financing deal still need to be finalized over the coming month. The mayor anticipates that a final deal will be in place by February 1, 2010.