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.
"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"
I hope he said "would bring" instead of brings, because BT is no closer to compliance with Condition 60 today than they were in the last several months. The "deal" is a proposal to attempt to sell notes for a total of $60.5m against a network whose worth no one has attempted to show approaches that. BT is still in violation of Condition 60. In fact, nothing in the MOU specifies that any of the $60.5m goes to repay the pooled cash as far as I can tell.
Posted by: Jimmy | November 13, 2009 at 07:11 PM
Can someone run some smelling salts under keough's nose just to be sure he's awake at the board of finance meeting. That man hasn't connected a dot in a long time.
Posted by: Shimmy | November 13, 2009 at 11:22 PM
Shay,
Wow-wee! you have really missed the boat and fallen off the pier.
This announcement is merely to say that Leopold has convinced Piper to sell shares of the muni-tax-exempt financing for 60.5 M - they HAVE NOT secured financing!!! Are you an idiot?! Of course not:
Correct yourself, please. The due diligence on BT has not been completed and the sale of notes will not proceed until other hurdles have been cleared.
I thought you were smarter than this!
Posted by: Shay Rotten | November 13, 2009 at 11:28 PM
Correction in my last post:
Instead of "Shay....are you an idiot?"
It should have read "Ken Picard....are you an idiot?"
Posted by: Shay Rotten | November 13, 2009 at 11:30 PM
Hey, "Shay Rotten," before calling me an idiot — and doing so behind a pseudonym, to boot — go back and re-read the post: It says that the city received a "letter of engagement" and a "financing proposal." It also notes that the deal still needs to be finalized in the coming month, assuming City Council signs off on it. The post makes no reference to performing due diligence on BT.
You want to carry on a dialogue on this blog? Correct an error, challenge a quote or debate an interpretation of facts? Fine. But don't be an asshole about it, especially while lacking the testicular fortitude to sign your real name.
Posted by: Ken Picard | November 14, 2009 at 01:04 PM
I find it difficult to support this move as the reason we got here was underhanded, denied the truth, violated the vote of 2000 when taxpayer money was said not to be put in jeopardy. Taking the high road and gone to the council and citizens in the first place would of eliminated the distrust that the Mayor and CAO have inflicted on themselves. I hope BT does not self destruct like the Mayor and CAO, but with these two leaders the city is barreling forward on a path to self destruction. Trust is lost and the Mayor and CAO must resign to re-establish trust in City Hall.
Posted by: Dale Tillotson | November 14, 2009 at 01:37 PM
Kiss also is quoted as saying " the use of pooled cash has not been and is not an increased risk to the taxpayers of Burlington.
We still do not know that yet.
Posted by: Dale Tillotson | November 14, 2009 at 01:52 PM
Ken, the title of the post is "city secures refinancing for burlington telecom." The City has not secured refinancing for burlington telecom.
Posted by: Jimmy | November 14, 2009 at 02:19 PM
Ken, sorry for the pseudonym, but that's the way it goes. There are a lot of reasons people use them, cowardly, noble and otherwise. (I agree people should be careful not to name call or disparage or challenge someones "testicular fortitude".)
Let me echo what Jimbo has written...your headline says:
"City Secures Refinancing For Burlington Telecom"
That's just not correct. The Kiss Admin has a plan, a proposal, for the refinancing. Your headline (and many other media outlets have the same problem on this) is misleading.
Posted by: Jonny Rotten | November 14, 2009 at 02:46 PM
Kiss announces "financing proposal" this is not a restructuring of the debt. Without an audit of Leopolds and Burns transgressions we have no idea what we are paying for.
This is just a bunch of hacks who support some form of bullshit politics cramming down lies onto the populace.
Burlington Telecom has once again secured the idea of financing. We are no closer to a signed deal than we were last week.
A letter of engagement is just that it opens a dialogue and sets the terms Bt has not yet met the terms of the agreement nor has Piper Jaffary sold the COP's.
Cops are generally sold with a solid underlying asset, a bond that secures real estate. The City of Burlington would be the recipient of the cash not BT. It is the City of Burlington that will be liable for the losses should BT fail under its current management of flunkies and failures. Isn't that kind of financing in violation of the spirit of the law under our DPS agreement?
BT will never survive under the management of Chris Burns who has shown time and time again that he is incapable of drafting a workable plan for Telecom, he has missed his numbers and blown his budget by trebling it every year.
Why is this a cause for celebration only for Totten the Progressive party felch.
Posted by: Buster | November 15, 2009 at 10:11 AM
Sounds like Shay and Ken are drinking the prog cool-aid.
Are they on the roll?
Posted by: Dan | November 17, 2009 at 09:05 PM
I can't believe how misleading the heading of this is. Come on Ken, fix it...it makes you look bad. Everyone knows nothing has been "secured".
"City secures refinancing for Burlington Telecom" WTF?
Posted by: Owen Mulligan | November 20, 2009 at 02:26 AM