city officials met with their St. Paul-based financial adviser last week to advance the effort to restructure the 4-year-old bond agreement issued to create the city-owned telephone, Internet and cable TV provider.
Barry Fick, senior vice president at Springsted Incorporated, a public sector adviser, said the hope is to gain agreement from bondholders to lower the interest payments before the city’s next payment on the bonds is due in June. Currently, the city only pays interest on the $26.44 million in bonds that were issued in 2008. The first principal payment is due in 2013, Fick said. The city makes two payments a year to the bondholders.
It’s not unusual for municipalities to restructure such deals, Fick said (he’s currently handling three such deals). But he added that doing so only four years after the original bonds were issued is not as common.
It sounds as if one issue is that they’re losing customers to lower pricing – especially from Charter Communications…
According to Kelly’s fourth-quarter report, FNM had a net loss of 36 cable TV customers between the second and third quarters last year and a net loss of 81 cable TV customers between Sept. 1 and Dec. 31. FNM has 1,423 Internet customers, down slightly from the peak of 1,504 in September 2011. It has 1,058 cable TV customers and 1,002 telephone customers.
Part of the issue for FiberNet Monticello is that Charter folks are apparently going door to door with amazing pricing – or what the FiberNet Monticello folks have called predatory pricing. I think that from the competitive perspective of course it makes sense to do what you can in terms of making a profit; that’s what businesses do. But I think that just as Monticello has been held up at a municipal network story of inspiration that may have made it an even more attractive target for competitors.
It sounds as if the financing will need to be addressed…
For his part, Springsted’s Fick said reducing the debt service is vital to turning FNM’s situation around. He said one group of investors holds about 30 percent of the bonds and hopes that it can be a lead cow, so to speak, in getting other bondholders to agree to renegotiated terms.
“We know who they are and we’re keeping them apprised of the situation,” Fick said. “In order for this restructuring to be successful, we have to get consent of virtually all of the bondholders.”