Agent Alliance Demands Answer on Channel Contracts in Blue Casa’s TNCI Acquisition

Bankrupt CLEC TNCI is moving towards clinching its acquisition by residential phone specialist Blue Casa Telephone: the bankruptcy court is expected to approve the sale of TNCI to Blue Casa at a hearing scheduled for March 13. However, Blue Casa, which has no channel program in place, has yet to announce a plan for transitioning TNCI’s legacy channel partner accounts, including residual commission agreements. That fact has prompted the Agent Alliance to file a motion with the court to force the company to make public a decision on its channel strategy by the initial closing of the deal, which is expected on May 1.

“In connection with Blue Casa’s purchase agreement, TNCI has produced two lists identifying the contracts and leases that it is potentially interested in acquiring as part of the sale,” explained Bill Power, CEO of the Agent Alliance, in a statement. “The fact that none of the agents’ contracts with TNCI are included on these lists makes clear that Blue Casa is not interested in acquiring the agents’ existing contracts with TNCI.”

For its part, Blue Casa’s Compton has said publically that his company is actively engaged in negotiations with the agent community to resolve issues and obligations in the transition, and called the agent channel “important.” However, he also noted that amendments to existing contracts were possible, depending on the circumstances.

“Blue Casa’s president and CEO Jeff Compton stated publicly that the agent agreements will not be affirmed as-is, but may need to be amended because they are not ‘economically feasible,’” Power noted.

TNCI, which filed for Chapter 11 bankruptcy protection Oct. 9, 2011, has had no further bids since Blue Casa became the stalking horse bidder for the company, meaning that the deal will likely go through.  While the initial closing is expected May 1, securing the rest of the regulatory approvals for finalizing the transaction could take several months. And that, the Agent Alliance implied, gives Blue Casa too much time to consider a way out of honoring TNCI’s agent commitments.

“Because the final closing under the Blue Casa asset purchase agreement won’t occur for six more months, it is likely the case that Blue Casa plans to enforce the terms of the agents’ existing contracts with TNCI while trying to negotiate new ones on worse economic terms,” Power said. “After seeking advice from our counsel, the Alliance has concluded that the only way to protect our members is to file a motion with the Bankruptcy Court asking that Blue Casa and TNCI make a decision to assume or reject contracts with Alliance members no later than the initial closing on the sale (which is expected to occur in the next few weeks).”

Power listed out the Agent Alliance’s wish-list, which is essentially the outline of a channel program: “protection for the residual stream from the customers that we’ve worked so hard to generate and maintain for TNCI; payment of cure amounts that we’re legitimately owed; an ongoing commitment to the channel; a competitive portfolio of SMB telecom solutions that we can sell; reasonable compensation for future sales; and effective support to our customers and us.”

Blue Casa could not be immediately reached for comment.

“There is still the prospect that the Alliance may reach an agreement with Blue Casa on the terms of a deal to continue the relationship, but given that those discussions have not been meaningful so far, our counsel advised us that we needed to file the motion at this time,” Power said.