Trans National Communications International Inc. (TNCI) on Monday filed a plan of reorganization with a federal bankruptcy court in Massachusetts.
The plan moves the Boston-based telecommunications provider one step closer to emerging from Chapter 11 bankruptcy protection.
Brian Twomey, the CEO and president of TNCI, told Channel Partners that creditors could vote on the plan as soon as late March and during the month of April. The company intends to seek confirmation of the reorganization plan by May 31, 2012.
“The filing of our plan represents a significant milestone in our restructuring efforts and is indicative of the positive progress achieved against our interim operating plan since filing for Chapter 11 protection on Oct. 9, 2011,” Twomey said in a statement released Tuesday. “We feel confident in the plan put forth and look forward to emerging as a stronger company, positioned for long-term growth within the Channel.”
In a disclosure statement accompanying the reorganization plan, TNCI revealed it has maintained its base of 18,000-plus end-customers in spite of the bankruptcy. The company is a telecommunications reseller offering local and long-distance phone service and data communications services to small and medium businesses throughout the United States.
The reorganization plan “contemplates the payment in full of secured creditors, administrative priority creditors and priority creditors. The plan contemplates a dividend to non-priority unsecured creditors of approximately seven and one-half percent (7.5%),” TNCI stated in the disclosure statement. “Those telecommunications network carriers, sales agents and other non-insider creditors with executory contracts who elect to continue doing business with the debtor on modified contract terms are separately classified and their claims will be treated in accordance with separate agreements to be negotiated.”
Citizens Bank of Massachusetts is one of TNCI’s largest secured creditors with a claim of roughly $4.3 million. Some of the company’s largest unsecured creditors include AT&T, Sprint and CenturyLink’s Qwest Communications, which is owed nearly $2 million, according to the initial bankruptcy filing. Sprint is owed more than $5 million while AT&T is owed roughly $1.66 million.
In financial statements filed with the court, TNCI projects 2012 total revenues of $73.3 million. Of its projected $60.2 million in total direct costs, TNCI anticipated that agent commissions will account for nearly $8.3 million in costs. The company listed liabilities of $17.9 million and total assets of nearly $14.7 million as of December 2011.
Twomey said TNCI anticipates emerging from bankruptcy with less than $10 million in total debt.
TNCI, which relies on such carriers as AT&T, CenturyLink/Qwest and Sprint to provide communications services, said unresolved billing disputes and substantial rate increases by the underlying carriers led to the bankruptcy filing. “The debtor has been forced to absorb nearly all of the impact of these rate hikes since it could not pass these rate increases onto its own end-user customers,” the company stated in the disclosure statement.
Twomey told Channel Partners TNCI has resolved such billing issues moving forward and is involved in litigation regarding historical billing issues. He declined to provide further comment on the litigation, although the disclosure statement cites a complaint pending in the bankruptcy court that TNCI filed against Qwest. Twomey also said the company has resolved the impact of the rate increases.
As previously reported by Channel Partners, in 2009, TNCI was hoping to sell the company in 2011. Instead, the company filed for bankruptcy. Twomey can’t rule out the potential that TNCI would be forced to sell itself in bankruptcy, but he said there’s a common view among creditors that the company would produce greater value by emerging from bankruptcy as a going concern.
TNCI is still hoping that one day it can sell itself. But for now, the company is focused on getting out of bankruptcy.
“Our desire is to come out and come out strong and continue to provide value for the carriers and for our agents,” Twomey said.