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.