HomeMy WebLinkAbout15 Broadband Services I
I !UCKEE D O _ 41 1.
Public Utility District
Staff Report - dosedsesa.
To: Board of Directors
From: Alan Harry, Director of Telecommunications Services
Date: March 31, 2004
Subject: Broadband Business Implementation; Financing; Friedman Luzatto and
Company "Break-Up Fee"
Summary
The District has been actively moving forward to provide competitive Broadband services to
the homes and businesses within its service territory. As part of the process to secure the
funds necessary to construct the System, an Underwriting firm/Placement Agent is needed.
In March of 2002 the District contracted with Friedman Luzatto and Company to act in this
capacity. At that time the goal was to fund the project by the third quarter of 2003. In
August of 2003 the District, due to Friedman's inability to move the funding portion of the
project forward, terminated its contract with Friedman, Luzatto and Company. This contract
provided that Friedman be paid a "break-up fee, and reasonable expenses if the District
opted to terminate the contract. Negotiations with counsel for Friedman Luzatto and
Company have recently come to a close. General Counsel, Bond Counsel and District staff
recommend that the Board approve payment of this "break-up fee" as provided below.
History
At your regular meeting of March 5, 2003 the
District engage the firm of Friedman, Luzzatto and Company. From March of 2003 through
July of 2003 District Staff, General Counsel, Bond Counsel and Aggregate Networks worked
with Friedman Luzatto with the goal of funding the project by the later part of the third
quarter, 2003. By August of that year very little activity had taken place. The District's
financing team chose to recommend that a new underwriter or placement agent be located,
and that Friedman Luzatto's contract be terminated.
At your Special meeting of August 15, 2003, the Board acted to terminate its contract with
Friedman, Luzzatto and Company.
• Page 1
k
In September of 2004 5 the District contracted with Barton Creek, aka Revere-Jenison
Securities, as Placement Agent to assist in the process of locating and securing the funds
necessary to construct a Fiber to the User system. As of this writing, approximately six
months after their engagement, Barton Creek have located an institutional investor that
wishes to fully fund the District's Broadband project.
New Information
Following the termination of the District's contract with Friedman Luzatto and Company in
August 2003, General Counsel began negotiating the "break-up fee" called out in the original
contract. This fee would include an $25,000 plus reasonable expenses.
During the past seven months this fee has been negotiated to $40,000.
Recommendation
In accordance with the recommendation of District Staff, General Counsel, and Bond
Counsel, it is recommended that the Board authorize the District to pay Friedman Luzatto
and Company $40,000 as its "break-up fee", and direct General Counsel to prepare the
necessary termination documents.
0 Page 2