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«In the Matter of STANFORD SPRINGEL AS CHAPTER 11 TRUSTEE WC Docket No. 09- FOR THE BANKRUPTCY ESTATE OF INNOVATIVE COMMUNICATION CORPORATION, ...»

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Exhibit 1

Description of Proposed Transaction,

Public Interest Showing,

and Related Requests and Showings

Before the

FEDERAL COMMUNICATIONS COMMISSION

Washington, D.C.

In the Matter of

STANFORD SPRINGEL AS CHAPTER 11 TRUSTEE WC Docket No. 09-____

FOR THE BANKRUPTCY ESTATE OF INNOVATIVE

COMMUNICATION CORPORATION,

Transferor and Assignor, and

NATIONAL RURAL UTILITIES COOPERATIVE

FINANCE CORPORATION AND ITS

SUBSIDIARIES,

Transferee and Assignees, Applications for Consent to Transfer Control and Assign Commission Licenses and Authorizations Pursuant to Sections 214(a) and 310(d) of the Communications Act of 1934, as Amended

DESCRIPTION OF PROPOSED TRANSACTION,

PUBLIC INTEREST SHOWING,

AND RELATED REQUESTS AND SHOWINGS

Springel/New ICC – CFC Transaction Exhibit 1: Public Interest Statement

INTRODUCTION AND EXECUTIVE SUMMARY

The Commission should quickly consent to the acquisition of the wireline, wireless, and cable television businesses owned and operated by Innovative Communication Corporation, acting by and through its Chapter 11 bankruptcy trustee (“New ICC”), and by its subsidiaries in the U.S. Virgin Islands by the National Rural Utilities Cooperative Finance Corporation (“CFC”) (together with the acquisition of other assets not subject to Commission jurisdiction, the “Proposed Transaction”). CFC’s acquisition of these businesses will ensure continuity of service and rehabilitation of the businesses following New ICC’s lengthy bankruptcy. CFC is a member-owned, not-for-profit, non-governmental cooperative financial institution focused on lending to its rural-utility members. Its deep knowledge and extensive experience with rural utilities-related businesses make it an ideal purchaser of New ICC’s businesses.

Between 1987 and 2001, the Rural Telephone Finance Cooperative (“RTFC”)—an organization that was founded and is managed by CFC—loaned New ICC and its predecessor more than $500 million, secured by perfected liens in nearly all of the assets of New ICC and its subsidiaries. New ICC defaulted on those loans in 2004 and failed to repay those and other third-party debts. Consequently, New ICC—but not any of its operating subsidiaries—was involuntarily placed into bankruptcy in 2007, with RTFC being the principal secured creditor.

The U.S. District Court of the U.S. Virgin Islands, Division of St. Thomas and St. John, Bankruptcy Division (the “Bankruptcy Court”) appointed Mr. Stanford Springel as Chapter 11 trustee to administer the bankruptcy estate of New ICC (“Mr. Springel” or “Chapter 11 Trustee”). In April 2008, the Chapter 11 Trustee began marketing the assets associated with the Proposed Transaction to potential acquirers. In late-January 2009, RTFC elected to credit-bid for those assets pursuant to Section 363(k) of the United States Bankruptcy Code (“Bankruptcy

–  –  –

Code”), which permits a secured creditor to bid part or all of its secured-debt claim in order to acquire the assets to which its liens are attached in exchange for cancellation of indebtedness in the amount of the bid. On April 9, 2009, the Bankruptcy Court entered an interim sale order authorizing, among other things, the Chapter 11 Trustee and CFC to seek regulatory approvals for the relevant components of the Proposed Transaction from the Federal Communications Commission (“Commission” or “FCC”), the U.S. Virgin Islands Public Services Commission (as the regulator of public utilities, including the Virgin Islands Telephone Corporation (“Vitelco”), and as the franchising authority for cable television systems in the U.S. Virgin Islands), the British Virgin Islands Government, and the Netherlands Antilles Government.

The Proposed Transaction is both stock- and asset-based. CFC (acting through its special-purpose subsidiaries) will acquire all of the outstanding stock of New ICC’s existing subsidiaries. CFC will not acquire the stock of New ICC itself. CFC’s special-purpose subsidiaries will also acquire certain of New ICC’s assets and businesses. Upon consummation of the Proposed Transaction, CFC will control the following Commission licenses and

authorizations:

–  –  –

New ICC will also assign certain private and common-carrier wireless licenses and domestic and international Section 214 authorizations to two subsidiaries of CFC. Consequently, the Proposed

–  –  –

Transaction will require review of applications filed with the Commission’s Wireline Competition, Wireless Telecommunications, International, and Media Bureaus.

The Proposed Transaction will serve the public interest by ensuring continuity of service by the principal providers of telecommunications and cable television services in the U.S. Virgin Islands, including the incumbent local exchange carrier, Vitelco. Under CFC ownership, these companies will have improved access to capital and the ability to focus anew on their core businesses. Consequently, these businesses will be much-better positioned to improve their operations, quality of service, and disaster planning and recovery. They will also be betterpositioned to evaluate their infrastructure and investment needs and plan for the provision of new and enhanced services. The Proposed Transaction raises no foreign ownership concerns, as CFC is U.S.-owned and controlled. The Proposed Transaction will not harm competition in the USVI wireline, mobile/broadband and multichannel video programming (“MVPD”) markets, as CFC is a non-carrier whose combination with New ICC’s businesses will generate no anticompetitive vertical or horizontal effects. To the contrary, CFC’s acquisition of New ICC’s businesses will strengthen competition in those markets by ensuring those businesses have access to capital and are able to become more robust competitors.





In part I of this exhibit, the Applicants provide background on the parties to the Proposed Transaction, the bankruptcy of New ICC and related proceedings, and the Proposed Transaction itself. In part II, the Applicants set forth the standard of review governing Commission review of the Proposed Transaction. In part III, the Applicants explain how the Proposed Transaction will serve the public interest, convenience, and necessity. In part IV, the Applicants address related requests and showings.

–  –  –

INTRODUCTION AND EXECUTIVE SUMMARY

I. BACKGROUND

A. Transferor/Assignor Parties to the Proposed Transaction

1. Stanford Springel as Chapter 11 Trustee (“Mr. Springel” or “Chapter 11 Trustee”)

2. Innovative Communication Corporation, Debtor (“New ICC”)............... 1 B. Other Operating Entities Related to the Proposed Transaction

–  –  –

2. Innovative Long Distance, Inc. (“ILD”)

3. Virgin Islands Telephone Corporation d/b/a Innovative Telephone (“Vitelco”)

4. Vitelcom Cellular, Inc., d/b/a/ Innovative Wireless (“Innovative Wireless”)

–  –  –

7. ICC TV, Inc. d/b/a ICC TV2 (“TV2”)

8. Group B-200, Inc. (“Group B-200”)

9. Atlantic Aircraft, Inc. (“Atlantic Aircraft”)

C. Transferee/Assignee Parties to the Proposed Transaction

1. National Rural Utilities Cooperative Finance Corporation (“CFC”)

–  –  –

D. Bankruptcy and Related Proceedings

E. The Proposed Transaction

II. THE STANDARD OF REVIEW

III. THE PROPOSED TRANSACTION WILL SERVE THE PUBLIC

INTEREST, CONVENIENCE AND NECESSITY

–  –  –

B. The Proposed Transaction Will Permit Rehabilitation of the Businesses

C. The Proposed Transaction Will Improve Disaster Planning and Recovery

D. The Proposed Transaction Will Enhance Competition in the Provision of Wireline, Mobile and MVPD Services

IV. RELATED REQUESTS AND SHOWINGS

A. Related Government Filings

B. Other Licenses and Authorizations Included

C. Unconstructed Facilities

D. Unjust Enrichment

E. Environmental Impact

–  –  –

H. Request for Permit-But-Disclose Ex Parte Status

I. Exemption from Cut-Off Rules

–  –  –

Mr. Springel is the seller in the Proposed Transaction. On October 4, 2007, the Bankruptcy Court entered an order appointing Mr. Springel as Chapter 11 Trustee for the bankruptcy estate of New ICC.1 On April 9, 2009, the Bankruptcy Court authorized the Chapter 11 Trustee and CFC to seek, among other things, regulatory approvals (including Commission approvals) for the Proposed Transaction.2 Mr. Springel is a Managing Director of Alvarez & Marsal North America, LLC (“A&M”)—a global financial advisory services firm headquartered in New York City—where he specializes in corporate restructuring and turnaround work. Mr.

Springel individually, and not the firm of A&M, serves as Chapter 11 Trustee. He is a U.S.

citizen with his principal place of business in San Francisco, California.

–  –  –

New ICC is principally a holding company for telecommunications and cable television businesses located in the U.S. Virgin Islands.3 New ICC is a U.S. Virgin Islands corporation 1 Order Approving Selection of Trustee, Case No. 07-30012 (Bankr. V.I., entered Oct. 4, 2007).

2 Interim Order (A) Approving Sale of Group 1 Assets Free and Clear of All Liens, Claims, Encumbrances, and Other Interests; (B) Approving Assumption and Assignment of Certain Executory Contracts and Unexpired Leases and (C) Granting Related Relief, Case No. 07Bankr. V.I., entered Apr. 9, 2009) (“Interim Sale Order”).

3 The short-form name “New ICC” reflects the fact that New ICC’s corporate predecessor-ininterest was also named Innovative Communication Corporation. See Reorganization Agreement by and between Innovative Communication Corporation (“Transferor” or “Old ICC”) and Atlantic Tele-Network Co. (“Transferee” or “New ICC”), attached as Exhibit A to Exhibit 2 of the Involuntary Chapter 11 Petition, Case No. 07-30012 (Bankr. V.I., filed July 5, 2007). The Transferee acquired all of the Transferor’s assets and later renamed itself Innovative Communication Corporation.

Springel/New ICC – CFC Transaction Exhibit 1: Public Interest Statement headquartered on St. Croix, U.S. Virgin Islands. New ICC relies on the Commission’s blanket domestic Section 214 authorization and holds an international Section 214 authorization, broadband PCS licenses, advanced wireless services (“AWS”) licenses, and common carrier point-to-point microwave licenses. In addition to its activities as a holding company, New ICC operates two business divisions: (1) IBS (discussed below), and (2) VI PowerNet, an Internet services provider in the U.S. Virgin Islands. New ICC was placed into involuntary Chapter 11 bankruptcy by the Bankruptcy Court on July 5, 2007.4 Judge Judith Fitzgerald entered the Order for Relief on September 21, 2007, in New ICC’s bankruptcy case. On October 4, 2007, the Bankruptcy Court appointed the Chapter 11 Trustee to manage the New ICC bankruptcy estate.

B. Other Operating Entities Related to the Proposed Transaction

–  –  –

IBS is a provider of telephone key systems, peripheral equipment, inside wiring and maintenance contracts to businesses and governmental entities in the U.S. Virgin Islands. Until September 2008, IBS provided pay telephone services on a small scale. IBS is an operating division of New ICC but is not separately incorporated. IBS is headquartered on St. Thomas.

Following consummation of the Proposed Transaction, IBS assets will be owned by VIPN (as defined below).

–  –  –

ILD is a telecommunications carrier providing interstate and international services to and from the U.S. Virgin Islands. ILD is a U.S. Virgin Islands corporation headquartered on St.

4 New ICC became a Debtor-in-Possession entity after the petition for relief was filed. With the appointment of the Chapter 11 Trustee, New ICC became a Trustee-in-Possession entity.

For the sake of simplicity, the term New ICC is used to refer to pre-bankruptcy New ICC as well as New ICC Debtor-in Possession and New ICC Trustee-in-Possession.

–  –  –

Thomas. ILD is a direct subsidiary of New ICC but is not, itself, in bankruptcy. ILD relies on blanket wireline authority pursuant to 47 C.F.R. § 63.01. Following consummation of the Proposed Transaction, ILD will be a direct, wholly-owned subsidiary of CFC USVI Holdco (as defined below).

–  –  –

Vitelco is the incumbent local exchange carrier in the U.S. Virgin Islands. Vitelco is a U.S. Virgin Islands corporation headquartered on St. Thomas. Vitelco is a direct subsidiary of New ICC but is not, itself, in bankruptcy. Vitelco relies on blanket wireline authority to provide exchange access services, pursuant to 47 C.F.R. § 63.01, and holds common carrier point-topoint microwave, industrial/business pool-conventional, and paging and radiotelephone licenses.

Following consummation of the Proposed Transaction, Vitelco will be a direct, wholly-owned subsidiary of CFC USVI Holdco.

–  –  –

Innovative Wireless is a commercial mobile radio services (“CMRS”) carrier operating in the U.S. Virgin Islands. Innovative Wireless is a U.S. Virgin Islands corporation headquartered on St. Thomas. Innovative Wireless is a direct subsidiary of New ICC but is not, itself, in bankruptcy. Innovative Wireless is the holder of international Section 214 authorizations and cellular licenses. Following consummation of the Proposed Transaction, Innovative Wireless will be a direct, wholly-owned subsidiary of CFC USVI Holdco.

–  –  –



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