The city has to sell the telecom as part of a settlement to end a $33 million lawsuit brought by Citibank, Burlington Telecom’s main creditor.
“I think we can see the light at the end of the tunnel, but obviously this is a very critical time for the city,” said City Councilor Joan Shannon, D-South District.
The process will focus on courting a small number of potential buyers capable of meeting sale criteria developed by the Burlington Telecom advisory board and the City Council with input from the public.
That’s more likely to result in a new owner willing to partner with the city than if Burlington went the more traditional route of “just putting a for sale sign on Burlington Telecom,” said David Provost, chair of the advisory board.
An open auction-style sale may have garnered more suitors, Provost said, but many bids likely would be from companies or investors who can’t meet the criteria adopted by the city.
By focusing on “fewer but more qualified candidates,” Provost said the city will be able to use its resources on “more in-depth probing” of those potential buyers.
Critics said during public comment at a previous City Council meeting that by not having a more open and widely publicized sale process, it could appear the city is looking for a prescribed outcome.
The recovery of $17 million spent on Burlington Telecom without City Council approval years earlier ranked low on the list of priorities among residents who completed a survey.
A 2014 settlement with Citibank requires the eventual sale of Burlington Telecom, though the city can retain partial ownership. The company’s assets were transferred to a holding company and leased back to the city.
As part of that agreement, the city must sell Burlington Telecom before January 2019, or the holding company can pick the buyer. Burlington will also keep a larger share of the proceeds the earlier a sale is completed.
Money from the sale will be split with Citibank, per the settlement, with 50 percent going to the bank if the sale occurs before January 2018. Burlington’s share declines to 35 percent in January 2019, 25 percent after that, and 10 percent if it’s sold in 2020.
The sale process approved Monday requires that formal offers be submitted by June 1, with the advisory board making recommendations for finalists by the end of that month.
The City Council would select a buyer from among the finalists before the end of August, and the legal documents are expected to be filed with the Public Service Board by Oct. 9. Any new owner would need to meet PSB requirements for a certificate of public good.
A group calling itself Keep BT Local has pushed for co-op ownership of the telecom, and potentially partnering with the city to operate the resulting entity.
The sale criteria approved by the City Council mention the idea of “allowing the city to retain a meaningful carried equity interest” in Burlington Telecom, Provost said. That falls in the range of 15 to 20 percent.
Burlington cannot remain the majority owner, and the larger the stake retained by the city, the less money it will get back from the sale. Citibank needs to sign off on a final transaction, and the financial institution may balk at letting Burlington keep too large an ownership stake, Provost said.
The city could put its share of the sale back into the purchasing entity to form a partnership, but any opportunity the city has to invest in the new entity must be provided to Citibank as well, he said.
