Less than two years after its CEO was a finalist for the coveted Entrepreneur of the Year award, Corban Communications Inc. has run into serious cash-flow problems and will be auctioned off to pay its debts.
A Dallas bankruptcy judge recently approved the rules for the submission of bids for the Plano-based bandwidth provider, which essentially acts as a technical middleman to help residents of rural areas in 26 states get Internet access, video and phone calls.
The auction is slated for May 17, though early bids will be accepted before then.
It's not clear how much Corban and two of its subsidiaries, Colorado 4-19 Network Inc. and Corban Towers Inc., might fetch.
Before Corban filed for Chapter 11 bankrutpcy protection in March, it received an offer to sell its assets for $14.05 million. But that deal died after Corban defaulted on some $1.53 million in debt to Frost Bank.
The sale must be done quickly. Corban is losing cash as it operates, and the business must be functioning in order to get the most out of a sale, bankruptcy filings say. The company has had liquidity problems for more than six months.
"They don't have the capital long-term to continue to operate. They need somebody who has capital to come in to keep the company operating," says Judith Ross, a partner at Baker Botts L.L.P., who is representing Corban. "We take very seriously trying to keep this business operating, but that's going to require a sale."
In court filings, Corban blames the crisis on a series of bankruptcies among its customers and vendors. Among the clients who have sought bankruptcy refuge are Global Crossing and WorldCom, now known as MCI.
Disputes between Corban and its creditors and vendors torpedoed a recapitalization about which Corban had been in talks since July, filings say.
What precipitated Corban's bankruptcy filing was a dispute with a Seattle-based vendor called 360Networks. 360Networks owns a fiber-optic network over which a Corban unit, Colorado 4-19, sells the rights to send voice and data traffic to Global Crossing and others.
The vendor threatened to shut off service critical to Corban operations in 11 states after Corban had trouble paying contracts that 360Networks had obtained with Corban via 360Network's purchase of another bankrupt firm, TouchAmerica.
The March bankruptcy filing means 360Networks must continue providing the service, so long as Corban pays 360 for services 360 has rendered since the filing.
In addition, Corban is trying to resolve a dispute with 360Networks over how much it still owes on the contracts. 360 puts the number at around $1 million, Corban at an unspecified amount below that.
Has 600 creditors
Founded in 1993, Corban grew quickly, both organically and via at least 12 acquisitions, to become a significant player in a niche field: linking broadcasters, phone companies and Internet service providers in major cities with their smaller brethren in small towns.
While residents in certain small towns in Idaho never saw Corban, for instance, they did watch broadcasts from Salt Lake City television stations that Idaho cable operators imported via Corban.
Corban provides links between big-city and rural firms in two ways: via fiber-optic facilities in the ground that are run by Colorado 4-19, and wirelessly via some 300 microwave towers owned by its Corban Towers unit.
Corban Communications is a holding company for both those subsidiaries and owns the customer contracts.
Corban's operations nationally include 60 so-called "points of presence," where its gear links up communications lines between long-distance or cellular carriers on the one hand, and either local-phone companies or customers themselves on the other. POPs can also be used for certain data services.
Corban has annual sales of about $17.5 million, according to a March credit report, though published accounts indicate that number is off from $38 million in 2001. Corban has made "The Dallas 100" list of fastest-growing local companies at least twice, ranking No. 25 in 2000 and No. 10 a year later.
In 2002, president and chief executive Hal Thomas was a finalist for the much-sought-after Ernst & Young Entrepreneur of the Year Award.
Unloading Corban, which has about 100 employees, and wrapping up the bankruptcy, will be complicated.
On the one hand, Corban and its two units have only $3.1 million in secured debt, the lion's share of which is owed to Frost Bank and Legacy Bank.
But Corban has nearly 600 creditors, many of them small. It also has many complex assets, such as wireless-spectrum licenses, intellectual property and various contracts.
Contact DBJ writer Jeff Bounds at jbounds@bizjournals.com or (214) 706-7122.