2008-11-18 Joint 2-A SubmittalBartka~Zankel~Tarrant~Miller ~ Laviff & Hannan, Inc. r,~'Cr~,r.nsr:!
fur File: 285.000
November 18, 2008
V[A HAND DELIVERY
Eric J, Firstman, Esq.
wulfsberg Reese Colvig & Firstman
300 Lakeside Drive, 24th Floor
Gakland, CA 94612-3524
Teresa L. Highsmith
City Attorney
City of Alameda
2263 Santa Clara Avenue, Room 280
Alameda, CA 94501
~ T'rr~fes,~r.:ortr~l(~or1x~rrtlia
'" 900 Frant Street, Suite 300
~~r~1 ~I~ + f ~~n i' F~~
San Francisco, CA 94111
p: 415.954.1900
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www.bztm.com
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Re: Vectren Communication Services, Inc. VCS} v. Alameda Power and
Telecom SAP&T}
Dear Counsel:
we became aware today of the City Council hearing scheduled for this evening
seeking approval of the sale of the telecom system to Comcast. There is no mention in the
lengthy report by Staff to seeking the consent of secured creditor VCS to such a transaction. As
we stated clearly in letters dated May 14, 2008 and June 23, 200$ attached} VCS's consent to a
sale of the system has not been obtained, and is required pursuant to § 8.2 of the Amended and
Restated Series 2002A Telecom System Installment Sale Agreement. Only a refinancing of
bond indebtedness within a 15-day period prior to June 1, 2009 would discharge the City's
obligations to VCS per §§ 5~a} and fib} of the Subordination and Intercreditor Agreement.
Moreover, pursuant to Cal. Commercial Code § 9315~a}~l}, VCS's security interest in system net
revenues survives a sa e.
Given the clear statements we have made in this regard, we are surprised that the
City has not sought VCS's consent. I am sure that as you address this matter with the City, you
will advise them that proceeding with an unconsented sale will be considered by VCS to be a
further breach of the agreements between VCS and the City, and that VCS's damages remedy is
to declare all principal components of the unpaid Installment Payments together with accrued
interest at the default rate immediately due and payable.
Re: Agenda Item #~-A
Joint CouncillAPFA Meeting
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21$8.00013966x8. I
Eric J~. Firstrnan, Esq.
Teresa L. Highsmith, Esq.
November I8, 2005
Page 2
Assuming the agreement with Comcast is approved and effected without
obtaining VCS's consent, please consider this letter a further notice of breach pursuant to
§ 9.1 fib} of the Amended and Restated Series 2002A Telecom System Installment Sale
Agreement. Accordingly, this letter is being copied to persons entitled to receive such notice, as
well as the City Clerk,
Finally, please provide the undersigned a copy of any final executed agreement
with Comcast, including all applicable schedules and exhibits.
Very truly yours,
Bartko•Zankel •Tarrant•Miller
r~ f'rr~fes.+runad C'orj~urrttiun
o-
~ ~
Robert H. Bunzel
RHBIbj s
Fnclnsures
cc: Mr. Stephen Rivero, Trustee via email}
Michael E. Schrader, Esq. via email}
Ms. Elizabeth I. Witte via email}
Girish Balachandran, General Manager Alameda Power & Telecom via hand delivery}
Ms. Lara V~eisiger, Office of the City Clerk via hand delivery}
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Bari•co•Zankel.Tarront.Mi~ler
Robert H. Bur~zel
rbunzel@bztm.com
our r=~i~: z~$a.aaa
May I4, 2008
VIA FACSIMILE AND U. S. MAIL
Eric y. Firstman, Esq.
V~'ulfsberg Reese Colvig & Firstman
300 Lakeside Drive, 24th Floor
Oakland, CA 94~ I2-3524
A Professior~a! Corporation
900 Front Street, Suite 300
San Francisco, CA 94111
p: 415.95b.1900
F. 415.956.1 i 52
www.bztm.com
Re: Alameda Power and Telecom SAP&T}1Vectren Communication Services, rnc.,.~yCS~
Dear Eric:
in response to your letter of May 7, 2008, VCS learned that AP&T was
circulating the Waller CrM in late February 2008 and got a copy in early March 2008. Such a
C1M may have been undertaken to determine current market value or interest, and we did not
learn until last month that AP&T is looking at closing a sale in ~0-9o days.
VCS' consent has not been provided as to any particular transaction or to a sale in
general. VCS' default notice letter dated August 2~, 2007 setting forth the potential litigation
remedies per the parties' contracts hardly constitutes consent to a unilateral sale by AP&T, and
your letter fails to demonstrate how the 2004 Documents authorize a sale. The 2004 bondholders
or 2004 Trustee have not issued a default notice and elected to proceed with a sale under those
documents.
Your letter further misstates VCS' contractual rights and secured interests. As
defined in the Amended and Restated Series 2002A Security Agreement, the "security" interest
granted .ta VCS was in "Net Revenues, all Deposit Accounts ...and all Proceeds ... ,subject to
the lntercreditor Agreement," and is not limited only to "Net Series 2002A Revenues."
VCS' authorization for any sale that would discharge its security interest is
required under the UCC, since a security interest continues in collateral notwithstanding sale,
lease, license, exchange, or other disposition thereof unless the secured party authorizes the
disposition free of the security interest. No such authorization has been sought or provided.
Terms, conditions and values have not been communicated, nor has VCS' input on a sale even
been solicited. To assert that VCS has authorized or consented under these circumstances is
commercially unreasonable, if not bizarre.
VCS has never claimed a security interest in real property, nor did my letter
contain any such "impIications." The VCS security interest lies in specific features of the
Telecom System asset, which is not unusual and is allowed by the UCC. The interests of the
z 1 sg.aaar~~gd~~.1
Eric J. Firstman, Esq.
May l4, 2008
Page 2
Secured Parties are not affected by a change in ownership and rather attach to certain net
revenues of the Telecom System, such that the security interest survives transfer of ownership.
This is clear, among other. terms, in the definition of "Net Revenue Period" in
defining "Net Series 2002A Revenues" and "Telecom System Revenues" in the Intercreditar
Agreement, a period that extends through the "later to occur of the termination date of tx} the
Series 2004 lndenture and ~y} the Series 2002A Trust Agreement." Thus, the lntercreditar
Agreement anticipates these amounts Net Series 2002A Revenues and Telecom System
Revenues} could extend over a period of time beyond the maturity date of the 2004 Notes. This
of course is consistent with § 5 of the Subordination and Intercreditor Agreement as noted in my
Apri130, 2008 letter, and is reinforced by its express provisions applying Telecom System
Revenues after the maturity date of the 2004 Notes. Congruently, the term of the 2002A
Securit Agreement is def ned as "the date on which the Secured Obligations have been
y
indefeasibly paid in full."
The implication at p. 3 of your letter that only APB~T has the obligation to pay
VCS for the 2004 bondholders} from certain net revenues of the Telecom System is contrary to
the parties' contracts and law. Surely, AP&T could not have simply sold the Telecom System to
a third an time after execution of the 2004 transactions and terminated ti}VCS' secured
p~Y y
interests in certain, net revenues and iii} the secured interests of the 2004 bondholders in the
repayment of $33 million,
"Alameda P&T" in the definitional section you cite at p. 3 of your letter refers to
the present owner, and when measured against the repeated and more specif c ~ provisions
descriviiYg how creditor riglats survive a salt, this reference cannot indicate any intent that the
creditors' interests in Telecom System Revenues, Net Series 2002A Revenues ar Net Revenues
are limited only to those amounts generated while AP&T owns the Telecom System.
Further, nothing in our correspondence to date suggests that VCS has asserted a
refinancing is feasibly available to AP&T under the current conditions of the Telecom System.
Our point on this subject was that absent refinancing between May 15-June 1, 2009, VCS'
payment rights continue, although they are subordinate after June 2009 to those of the 2004
bondholders.
Very truly yours,
6artko•Zanke! •Tarrant~Miller
.~ ~'rrfe,,sir~urrl Cr+rj+ursfir;u
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Robert H, Bunzel
RHBfb}s
cc: Mr. Stephen Rivero, Trustee via email}
Michael E. Schrader, Esq. (via email}
Ms. Elizabeth 1, Witte via email}
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aartlco•Zankel•Tarrant•Miller I lovitt ~ Hannan, Enc. raj ~;r~~~n~.:(
Robert H. Bunzel
rbur~zel~bztm.com
Our Fite: 2188.000
June Z3, Z448
VIA FACSIMILE AND U.S. MAIL
Eric J. Firstman, Esq.
~Vulfsberg Reese Colvig & Firstman
304 Lakeside Drive, 24th Floor
Oakland, CA 946 ~ Z-3 S Z4
~l T'raje~sir~rt.ri~d Cr~r~c~rrr~in~
9~0 Front Street, Suife 340
San Francisco, CA 9411 !
p: 415.956.1944
F: 4 ] 5.956.1152
www.bztm.cam
Re: Alameda Power and„Telecom APB~T}IVectren Communication Services lnc. VCS}
Dear Eric:
This letter responds to your letter of June 5, 2008. VCS possesses and asserts no
rights greater or less than those in the 2444 agreements. VCS is not asserting a cloud on title to
the Telecom System. Rather, a sale of the Telecom System by AP&T at this time, potentially
impairing VCS' secured interest in Net Revenues, reasonably requires the consent of VCS. Nar
is VCS refusing to consent. No transaction has been presented to VCS by AP&T.
Under § 8.Z of the Amended and Restated .Series Z00ZA Telecom System
installment Sale Agreement, any sale by AP&T is prohibited without VCS's consent, because
there are ZOOZA Certificates "Outstanding." Nor is AP&T's offering being made pursuant to
"any Series ZoQ4 Document," as the 2004 bondholders have neither noticed a default nor
proceeded to a sale remedy.
Nothing in § 8(a}(iii} of the Subordination and Intercreditar Agreement, referred
to in your May 7, Z0081etter, which provisions describe how proceeds from various types of
"liquidation" of the Telecom System would be allocated between the creditors, can he fairly read
to authorize the debtor to effect an unconsented sale of the Telecom System. Such a construction
is inconsistent with § S.Z, the intent of the parties, and would be commercially unreasonable.
A sale at this time would not in any event extinguish the respective security
interests of the secured parties in Telecom System Net Revenues. As stated before, the creditors'
security agreements contain termination dates that are essentially the dates upon which the
secured obligations are "indefeasibly paid in full." ~ Moreover, §§ 5(a) and (b} of the
Subordination and Zntercreditor Agreement are clear that only a refinancing of the $33 million
bond debt that is funded and closes within 15 days before June 1, 2409 (ar at an earlier date in
the sole discretion of VCS}, works a discharge of AP&T's obligations to VCS (other than those
arising from a prior event of default}, and absent such refinancing VCS's interests "continue,"
subject to the priorities at §§ 6,7 and S of that agreement.
2 I $$.0001379319.1
Eric J, Firstman, Esq,
June 23, 2DD8
page 2
Pursuant to Cal. Commercial Code § 9315~a}~ 1 }, VCS's security interest survives
a disposition sale} absent authorization, No authorization has been given by VCS and there has
been no transaction presented to VCS to authorize. In the event AP&T and a buyer have a
transaction that you wish VCS to consent to, VCS will review the same and compare its interests
in such a transaction to its contractual rights. Until and unless such consent is obtained, VCS has
not authorized any transfer and thus its security interest would survive the same by law and
contract.
As to your question about the likelihood of a refinancing, the same would have to
close and be funded within 15 days before June 1, 20Q9 per § Spa} of the Subordination and
Intercreditor Agreement sunless VCS consents to an earlier date}, and would also have to meet
several specific requirements.' VCS is not aware of any refinancing proposal that would meet
these standards given the net revenue history ~ under AP&Tys management, Indeed, any
difficulties APB~T is experiencing in pursuing a Telecom System sale that could meet the
interests of AP&T's creditors is also a function of the lack of strong net revenues to date by
AP&T.
VCS has offered before, and restates its position here, to meet with AP&T and the
2004 Trustee and 20Q4 bondholders to seek a responsible business solution, As VCS has
explained to AP&T, with proper cost management and the addition of voice services the
Telecom System could be substantially cash positive under municipal ownership and could be
refinanced or sold aver a positive net revenue history is established, consistent with the interests
of creditors.
'~Ve have offered to toll any statutes of limitation on claims that have been
asserted to date between VCS and AP&T, so that responsible discussions .can take place, and I
understand your client first wanted written confirmation that VCS is not asserting a cloud on file
to the Telecom System, which VCS is not.
Finally, pursuant to § 6.5 of the Amended and Restated Series 20o2A Installment
Sale Agreement, VCS has "inspection rights" to examine the Telecom System books and records
~ The required parameters for a refinancing that would discharge AP&T's obligation, in addition to
occurring between approximately May l5 and June 1, 2009, include the transaction being: fix} at an
interest rate not to exceed 9% per annum, ~y} notif cation to VCS, in writing, of ~i}the refinancing, and
(ii}the determination of the proceeds reasonably required for any reserve or security and the reasonable
and customary costs of the issuance, and ~z} VCS's receipt of a certif cafe from the underwriter or a
purchaser to the effect that ~i} the interest rate and purchase price have been set an arm's length and
reflect market conditions, and iii}stating the maximum reasonable ref Wanting Capacity of the Telecom
System as of the date of purchase thereof.
218$.00013793 [ 9. [
Eric J. Firstman, Esq.
dune 23, 2448
Page 3
at all reasonable times. VCS hereby exercises those rights, and its designee to examine the
books is an accounting firm known as:
Qdenberg, Ullakko, Muranishi & Co. LLP
465 California Street
Suite 740
San Francisco, CA 94144
Please advise me this week when in early f my such inspection can occur, and
regarding your clients' willingness to enter into a tolling agreement. And, as noted above, if there
is a particular transaction AP&T wishes 'VCS to consider, please advise.
'Very truly yours,
Bartko •~anke~ •Tarrant•Mi~1er
.~ Pmjr~.curn~d Cnr~uur~ir,n
~ ~~ •I
Robert ~. Bunzel
RHBIb~s .
cc: Mr. Stephen Rivera, Trustee via email}
Michael E. Schrader, Esq. via email}
Ms. Elizabeth I. 'Witte via email}
Z i 85.0013793 19.1
Page 1 of 2
Lara ~Veisiger - Re: Comcast and AP&T
From: Peter Franck <pfranck a~leelawless.com>
To: "'Beverly Johnson, Mayor "' <bjohnson a~ci.alameda.ca.us>, "'Doug deHaan, Councilmember
"' <ddehaan~a ci.alameda.ca.us~, "'Frank Matarrese, Councilmember "'
<fmatarrese a~ci.alameda.ca.us~, "'Lena Tam, Vice Mayor "' <Itam~a ci.alameda.ca.us~,
"'Marie Gilmore, Councilmember "' <mgilmore@ci.alameda.ca.us~
Date: 1 111 812008 2:42 PM
Subject: Re: Comcast and APB~T
Dear council members, I join Julie in her concern. Doug, thanks for talking to me on Saturday, however
I have not been able to get through to anyone since ~I recognize that you are all busy, but this is an
important free speech issue in any community.} Under the 1984 Cable Act the city has an obligation to
hold Comcast to its public access, educational, and governmental cable obligations usually referred to
as PEG}. Members of the public are entitled to know what the city is negotiating on this point in its
franchise renewal, and at the same time it should not engage in the sale of the telecom part of AP&T
until this is assured. I would ask you not to act on the proposed sale until there is clarif cation on this
point. I would also point out that contrary to newspaper reports it would be a Brown Act violation for
the council to attempt to act at tonight's meeting, as the matter is not noticed on the published agenda in
the requisite 72 hours for at all, as of this afternoon}. See next message.
At 05:44 PM 11/15/2008 -0800, Julie Rufo wrote:
Dear Council Members:
I have read that Camcast has made an offer to buy AP&T. whatever the merits of that
offer, my concern lies in a different area. I have been tall that Comcast plans to close the
studio which now runs the Public Access channel.
The studio and the public access channel are part of the opportunity to have at least 3 public
channels: one for access by the Public, one for Government city council meetings and
such) and one for Education system thence referred to as PEG}. The city should have been
protecting these or expanding them in the franchise renewal process.
I am very surprised that the City Council would consider a deal allowing Comcast to close
its studio here and to discontinue the public access channels. In fact, I believe that is a
violation of their licenselfranchise since they are required by law to provide access to the
public in exchange for the franchise.
I have a stake in this, since I have a show that is taped at the studio and airs on Comcast's
public access channel every week. I do not believe any deal should be agreed to that
violates the laws and does not take into account the requirement to provide a community
public access channel.
Since the franchise is up for renewal, it is your duty to protect the public by ensuring that
Comcast continues to provide the studio and the public access, as required.
Thank you.
Julie Rufo
jrufo a~sbcglobal.net
file:llC:IDocuments and Settingslcc_userlLocal SettingslTempl~Pgrpwise14922E8A0Ala... 11/18/2008
Page 2 of 2
www.alameda.pe.acen.etwork. org
wwwpe.rspe.c~zvesty....org
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