[B]URLINGTON — An attorney for Citibank says the bank will sue if the city sells Burlington Telecom to a local co-operative that is one of two finalists seeking to purchase the internet, phone and cable provider.
Hours before the City Council is expected vote on a buyer for Burlington Telecom, city officials posted online an email sent Sunday night from Citibank to an attorney working for the city.
In the missive, the Citibank attorney Kevin Fitzgerald writes that the bid from the Keep BT Local co-op is “not even remotely commercially reasonable and not qualified.”
Taking the $12 million KBTL offer over the $30.5 million offer from mobile and internet service provider Ting would be in bad faith and violate Burlington’s contractual obligations to Citibank, Fitzgerald wrote.
If the city decides to sell to KBTL, the move “will be vigorously opposed by Citibank on several fronts including but not limited to immediate litigation,” Fitzgerald added.
A 2014 settlement with Citibank, which ended a $33 million lawsuit the bank brought after Burlington Telecom defaulted on a loan, requires the local internet, cable and phone company to be sold. Citibank will receive a portion of the money Burlington gets in the sale.
A lawyer for Blue Water Holdings, which owns Burlington Telecom’s assets and leases them back to the city, also emailed city officials over the weekend saying it has “serious concerns” about KBTL’s bid. Blue Water will gets a portion of the sale proceeds, and while the city is able to direct the sale, the holding company must sign off on the buyer.
“KBTL is a first-time operator of a telecom system, lacks management experience, and its proposed debt financing reflects junk bond credit or worse,” wrote Michael Furlong, the attorney representing Blue Water.
Mayor Miro Weinberger raised similar concerns about the co-ops bid, and the potential for lawsuits from Citibank or others, at a news conference earlier this month, urging the City Council not to select KBTL.
Furlong questioned whether KBTL, given the deficiencies he cited, would be able to get regulatory approval from the Public Utility Commission, and closed his email by noting that Blue Water reserves its right to reject the city’s choice of a buyer.
There was more bad news over the weekend for the co-op, which has enjoyed vocal support from residents who want to see Burlington Telecom remain locally owned.
At a Friday news conference KBTL board members announced that Maine Fiber Company would reduce their interest rate on a $10 million loan from 14 percent to 8 percent, with higher payments contingent on success.
The co-op had tried to secure that lower interest rate to address concerns raised by city councilors that an economic downturn or unexpected costs could force a debt burdened KBTL operated Burlington Telecom into default.
However, KBTL board chair Alan Matson had to inform city officials over the weekend that the co-op’s final offer would not include the lower interest rate, and they should rely on the financials in its previous letter of intent, which included the 14 percent interest rate.
Matson did not respond to multiple calls Monday seeking an explanation for what happened, and whether the co-op annouced the lower rate before it was agreed to by Maine Fiber.
Monday’s Burlington Telecom sale vote could still be close, as KBTL was the top vote getter on Oct. 16 when the council winnowed the field from three bidders down to two.
At that time, KBTL received 6 votes, Ting received 5 and Schurz Communications, whose bid is no longer under consideration, received one vote.
