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Bankrupt Omnicity acquired for $876,000 by four investors

J.K. Wall
December 5, 2012
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A group of four investors has acquired Omnicity Inc., a bankrupt provider of rural broadband services, by agreeing to pay off an estimated $876,000 in company  bills.

The deal, approved last month by the U.S. Bankruptcy Court in Indianapolis, gives the investors, whose company is called Broadband Networks Inc., Omnicity’s 38-person operation, based in Rushville, as well as its 270 Internet towers around Indiana and Ohio.

Broadband’s bid, put forth in the spring, was the only one for Omnicity until early November, when a group of nine competing broadband companies offered $1.6 million for Omnicity.

But U.S. Bankruptcy Judge James Coachys rejected that bid as too late, allowing Broadband’s bid to go forward.

Dr. David Bash, one of the four new owners of Omnicity, said they do not plan to continue Omnicity’s rapid acquisitions of other companies, but instead hope to improve the quality and reliability of the company’s service.

“We hope to have a better management of capital, and hopefully plow it back into the business,” Bash said during a conference call with reporters on Wednesday morning. “Strategically, we’d be more interested in just growing our [existing] business as opposed to acquiring other providers.”

Omnicity, founded in Indianapolis in 2003, grew rapidly via acquisition, and built up as many as 12,000 subscribers in Indiana and Ohio. But the company’s financial troubles and bankruptcy have led to its subscriber total dwindling to just 5,000.

Broadband will keep Omnicity executives Jeff Garman and David Bradford on board, but in new roles, Bash said.

“They’re not necessarily the reason for the bankruptcy,” Bash said. “We think this is a talented crew.”

The new CEO of Omnicity is Jeff King, a former executive vice president for Time Warner Cable and former president of Road Runner High Speed On-Line.

King and Bash joined with two other cable industry veterans—Buz Nesbit and Mike Sellers—to acquire Omnicity.

Their bid to acquire the company also includes a commitment to pay up to 3 percent of the claims by unsecured creditors of Omnicity if the company starts generating profits again. As of September, Omnicity was pulling in revenue at an annual rate of $3 million but losing about $80,000 a year.

Omnicity’s unsecured creditors are owed somewhere between $3 million and $3.9 million, according to an analysis filed with the U.S. Bankruptcy Court. So the maximum Broadband will have to pay is $116,000.

Bash said all secured and unsecured claims would be paid as agreed. But Jeff Hokanson, an attorney at Frost Brown Todd who represents the unsecured creditors, said receiving 3 cents on the dollar means the unsecured creditors essentially receive nothing.

“No one is being paid enough to even pay their attorney to open a piece of mail,” Hokanson said.

Omnicity filed for Chapter 11 bankruptcy protection in September 2011 after getting hit with five lawsuits from acquired companies that claimed they had not been paid.
 

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  1. Apologies for the wall of text. I promise I had this nicely formatted in paragraphs in Notepad before pasting here.

  2. I believe that is incorrect Sir, the people's tax-dollars are NOT paying for the companies investment. Without the tax-break the company would be paying an ADDITIONAL $11.1 million in taxes ON TOP of their $22.5 Million investment (Building + IT), for a total of $33.6M or a 50% tax rate. Also, the article does not specify what the total taxes were BEFORE the break. Usually such a corporate tax-break is a 'discount' not a 100% wavier of tax obligations. For sake of example lets say the original taxes added up to $30M over 10 years. $12.5M, New Building $10.0M, IT infrastructure $30.0M, Total Taxes (Example Number) == $52.5M ININ's Cost - $1.8M /10 years, Tax Break (Building) - $0.75M /10 years, Tax Break (IT Infrastructure) - $8.6M /2 years, Tax Breaks (against Hiring Commitment: 430 new jobs /2 years) == 11.5M Possible tax breaks. ININ TOTAL COST: $41M Even if you assume a 100% break, change the '30.0M' to '11.5M' and you can see the Company will be paying a minimum of $22.5, out-of-pocket for their capital-investment - NOT the tax-payers. Also note, much of this money is being spent locally in Indiana and it is creating 430 jobs in your city. I admit I'm a little unclear which tax-breaks are allocated to exactly which expenses. Clearly this is all oversimplified but I think we have both made our points! :) Sorry for the long post.

  3. Clearly, there is a lack of a basic understanding of economics. It is not up to the company to decide what to pay its workers. If companies were able to decide how much to pay their workers then why wouldn't they pay everyone minimum wage? Why choose to pay $10 or $14 when they could pay $7? The answer is that companies DO NOT decide how much to pay workers. It is the market that dictates what a worker is worth and how much they should get paid. If Lowe's chooses to pay a call center worker $7 an hour it will not be able to hire anyone for the job, because all those people will work for someone else paying the market rate of $10-$14 an hour. This forces Lowes to pay its workers that much. Not because it wants to pay them that much out of the goodness of their heart, but because it has to pay them that much in order to stay competitive and attract good workers.

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