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May 10, 2001 By Charles Ashby DENVER – REAnet is going back to its two chief owners – La Plata Electric Association and Empire Electric – to ask for more money. The fledgling telecommunications company that is undergoing Chapter 11 bankruptcy in federal court here wants enough money to meet its payroll for the next three months in order to prepare the company for sale, REAnet bankruptcy attorney Harry Sterling said. Sterling told U.S. Bankruptcy Judge Sidney Brooks on Monday that an unnamed national telecommunications company may be interested in buying REAnet, but only if REAnet is still offering services to its 15,000 subscribers. He said the Internet provider is a stone’s throw away from completing a fiber-optics network from Albuquerque to Farmington to Durango that could generate millions of dollars for whomever buys it. With the completion of that fiber-optics network, REAnet envisioned becoming a major telecommunications company, rivaling Qwest Communications. If completed, REAnet could offer everything from high-speed Internet access to local phone service, Sterling said. "Once this gets complete, the revenues could be great, mainly because you’ve constructed most of the facilities that you need," Sterling said. "We have the people in place to do that, but we don’t have the money." Without that money, REAnet may be forced to sell all its assets under Chapter 7 bankruptcy rather than a Chapter 11 reorganization, which allows a company to keep its creditors at arm’s length while it works out a plan to become profitable. The Empire Electric Association board met on Wednesday morning and authorized Neal Stephens, the general manager of Empire Electric, to execute a loan of up to $75,000 to help meet Reanet’s payroll needs. "I can’t address the amount they were asking for," said Stephens, who explained that the board was still developing conditions for the loan. La Plata Electric Association canceled a special board meeting this week, but will likely take up the request at its regular monthly meeting on May 16, according to spokesman David Waller. Sterling did not say how much cash the company needs to pay the 44 employees still on staff. At one time, REAnet employed more than 60 people. The company receives about $300,000 a month from Internet subscribers but is running about $125,000 a month in the red, said Dan Smith, chief financial officer. Currently, it has about $300,000 in cash, he said. Smith and REAnet Chief Executive Officer Raymond Keith were in Denver to meet creditors and update Brooks on the status of its bankruptcy proceedings. They said if the company can remain afloat for just a little longer, then its nearly 75 creditors can get the $21 million REAnet owes them. While LPEA board Chairman Davin Montoya said Monday that he has trepidation about putting more money into the failing company, it makes sense to keep it afloat if it means not being stuck paying off a $7.5 million REAnet loan. Durango-based LPEA and Cortez-based Empire each agreed to guarantee a $15 million line of credit to REAnet from the National Cooperative Service Corp., a division of the National Rural Utilities Cooperative Financing Corp. that offers loans to electric cooperatives to fund non-electric business ventures. REAnet spent about half of that money before filing for bankruptcy April 2. REAnet filed for bankruptcy after defaulting on a $350,000 interest payment to NCSC on March 30. Turning more money over to the company would depend largely on how much REAnet plans to ask for and, more importantly, how serious the unknown buyer is, Montoya said. "It’s certainly worth looking into, but at this point I need to hear from them to see what they have in mind," he said. Journal staff writer Janelle Holden contributed to this report. |
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