Blue Casa-TNCI Deal Closes, But Agent Issues Remain Open

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Blue Casa Telephone LLC, a provider of residential and business telephone services in California, on Tuesday closed its acquisition of bankrupt telecom reseller Trans National Communications International Inc. (TNCI). The acquired company will continue to operate under the TNCI brand.

The federal bankruptcy court in Massachusetts approved TNCI’s asset purchase agreement (APA) with Blue Casa, Santa Barbara, Calif., March 14. TNCI filed for Chapter 11 bankruptcy protection, Oct. 9, 2011, and had expected to emerge from bankruptcy in spring 2012, but negotiations with the creditors stalled, and by summer, the companies were moving forward with the bankruptcy sales process.

The completed transaction does not end what has proven to be long process for TNCI’s agent channel on two fronts  the fate of their agency agreements and the resolution of their claims as unsecured creditors.

Agent Agreements

A spokesperson for Blue Casa/TNCI told Channel Partners that “TNCI has worked to get many agent agreements completed with existing agents and is working to sign even more agents.” The spokesperson estimated that Blue Casa/TNCI had signed agreements with agents representing “more than half” of its customer base.

The spokesperson did not reveal details of those agreements, but said Blue Casa/TNCI has “worked out a way for our signed agent partners to retain their residual commission and position the company for growth.” The agreements do contain “performance and efforts commitments,” the spokesperson said.

In addition, the spokesperson said, “TNCI is also looking for new agents to partner with for our future growth plans. TNCI is committed to serving its existing and new customers, and looks forward to a new era of strategic growth.”

One of TNCI’s largest partners, the Agent Alliance, tells a different story. While Blue Casa’s statements to the media indicate support for the agent channel, Agent Alliance CEO Bill Power told Channel Partners “the company’s behavior does not support that.”

The consortia of agencies in March filed a motion to compel Blue Casa/TNCI to accept or reject its agreement upon the initial close of the transaction. Power said because Blue Casa/TNCI had not accepted the contract by the transaction close on Tuesday, it is considered rejected and none of its provisions, including any non-solicitation clauses, are enforceable. In other words, Agent Alliance members can move their customers to other carriers, Power explained.

Power added that neither the Agent Alliance nor its attorneys were ever contacted by Blue Casa to discuss its agreement with TNCI. Blue Casa/TNCI declined to comment on its discussions with the Agent Alliance.

Channel Partners contacted several other TNCI agents regarding the status of their agreements; not all could be reached for comment in time for filing this report. Executives at master agency Intelisys said they are still reviewing the new agreement and, therefore, could not comment for this story. Another major master agency told Channel Partners on background that TNCI is “not proactively going after [TNCI] agents” to sign them up.

Unsecured Claims

Meanwhile, in the ongoing bankruptcy proceedings, TNCI and its creditor’s committee have filed separate liquidation plans for resolving the claims of unsecured creditors, which include some of TNCI’s agents.

On Monday, the creditor’s committee filed a motion with the bankruptcy court objecting to the approval of TNCI’s March 27 liquidation plan, calling its solicitation procedures “unfair, unreasonable, or simply contrary to the law.” Instead, the creditor’s committee is calling for the court to approve its procedures, which were filed April 4. A hearing in the matter is pending.

According to its March 27 disclosure statement, TNCI estimated unsecured creditor claims could range from $7 million to $26 million, depending primarily on which agent claims were allowed, which was contingent in part on whether their agreements were accepted or rejected by Blue Casa. Additionally, TNCI estimated it would have between $2.25 million and $2.5 million to distribute to these creditors once secured claims had been paid.

“The next question is how that gets split up,” Power told Channel Partners, noting that the Agent Alliance’s claim was $18.3 million. “Everyone has gotten paid except the agents,” he said, noting the irony that TNCI was built by the indirect sales channel. “Our commitment is unwavering to get our fair share.”

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