Ntelos Files for Bankruptcy Protection

Byline: Yuki Noguchi

Ntelos Inc., a local, long-distance, and wireless telecommunications service provider based in Waynesboro, Va., filed for Chapter 11 bankruptcy protection today, and is asking for court approval to accept $35 million in financing that will fund the company's operations through the restructuring process.

Ntelos, which was founded 105 years ago as the Clifton Forge Waynesboro Telephone Cooperative, is the primary local phone provider to 51,000 customers in Waynesboro, Clifton Forge, and outside of Roanoke. About a decade ago, the company started investing in new ventures like wireless, Internet service and high-speed Internet access, and incurred about $950 million in bank and bond debt, as well as preferred stock, said Michael Minnis, a spokesman for Ntelos. The company ran into trouble because it "couldn't support the debt with revenue growth," and therefore needs to restructure its debt, he said.

Last month, Ntelos missed semiannual interest payments of $18.2 million on its 13 percent senior notes and of $6.4 million on its 13.5 percent senior subordinated notes, indicating that the firm was in trouble. Ntelos listed over 1,000 creditors in its filings with the U.S. Bankruptcy Court in the Eastern District of Virginia.

Operationally, nothing will change through the bankruptcy, said Minnis. The management team will stay in place, and no layoffs or store closings are planned, he said.

In addition to its local customers, Ntelos has about 266,000 wireless customers in western Virginia, West Virginia, and some parts of Kentucky, Tennessee and North Carolina. It also has about 68,000 subscribers for its dialup Internet service and 5,500 digital subscriber line customers.

Wachovia Bank committed the $35 million in debtor-in-possession financing, and if the bankruptcy court approves the funding, $10 million of that will become available immediately. The company has not yet released its fourth-quarter financial results, but it has been draining its cash resources: At the end of September, the company said it had $543,000 in cash and cash equivalents, down from $7.3 million at the end of 2001.

Ntelos is negotiating with its banks to get continued access to its $261 million line of credit, which it said it believes will be possible, if Ntelos's senior noteholders agree to invest $75 million in the company upon emergence from bankruptcy.

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