After failing to decide between the two final Burlington Telecom bidders — the fiber and mobile company Ting and the Keep Burlington Telecom Local co-op — the Burlington City Council asked both parties to come together and offer them a combined proposal.
The council voted twice Monday night, with both votes ending in a 6-6 tie. KBTL has offered $12 million for Burlington Telecom, and Ting has offered $30.5 million. Ceding to the stalemate, councilors moved to a proposal by Ali Dieng, D/P Ward 7, to ask Ting and KBTL to come up with a compromise plan, adding a hefty dose of uncertainty to the already drawn-out sale process.
“I’m just keeping an open mind going into this,” said KBTL treasurer Andy Montroll, a Burlington attorney and former city councilor. “But I don’t know. I don’t know if there is an end result, or not.” Montroll said KBTL and Ting are holding their first meeting Tuesday.
Some councilors have doubts that Ting and Keep BT Local can strike a viable plan, citing major differences between the Toronto-based company and the local group. Councilors gave the two bidders until Friday to come up with a proposal.
Dave Hartnett, R/D-North District, described the forced compromise as “a last-ditch effort here for KBTL.”
“They got thrown a lifeline here and they took it,” Hartnett said.
Hartnett, a supporter of KBTL, said the co-op likely agreed to the compromise because serious hurdles stand between the co-op and Burlington Telecom.
It was revealed hours before last week’s council meeting that Citibank will sue Burlington if the city sells Burlington Telecom to KBTL, and 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 get 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.
Councilors took out language ensuring that the Ting and KBTL joint proposal be a cooperative, a major feature of the KBTL proposal.
“I’m disappointed that the language ‘through a co-op model’ was eliminated,” said Max Tracy, P-Ward 2. “I wish you great luck in trying to reconcile these two very different proposals.”
During last week’s meeting, council members were expected to vote between the two offers but delayed until Monday night due to a last-minute snafu. Karen Paul, D-Ward 6, recused herself from the discussion, citing an unnamed conflict of interest.
“This is not the position I want to be in,” Paul said at that meeting.
Paul quit her job as a staff accountant with the accounting firm McSoley McCoy & Co., later that week resolving the conflict, she said.
Max Tracy, P-Ward 2, pressed Paul and Eileen Blackwood, the city attorney, to reveal the conflict. Councilor Paul shook her head no.
“I’ve told you all I can tell you,” Blackwood said. “It’s a professional conflict that was connected with her job.”
Burlington Telecom is owned by the holding company Bluewater and its assets are leased back to the city, an arrangement reached following a settlement with Citibank. The 2014 settlement with Citibank ended a $33 million lawsuit brought by the bank, which had loaned money to Burlington Telecom.
Burlington’s agreement with the holding company allows the city to select a buyer. If Burlington is to keep the largest possible portion of the proceeds, the sale must be completed by year’s end.
If the joint Ting and KBTL proposal is rejected during the next council meeting, the council will open the bidding process back up during the following meeting Nov. 27.
Ting and KBTL will be back in the running, along with the two previous finalists, Indiana-based Schurz Communications and Faisal Nisar, who runs a private equity firm in New Jersey called ZRF Partners. However, Nisar has said he no longer wants to be considered as a potential purchaser of Burlington Telecom.
Correction: An earlier version of this story misstated when the city entered an agreement with Bluewater Holdings.
