Jan. 6--Four other companies made million-dollar pitches to buy Picus Inc.'s Internet Service Provider business, but Picus attorneys said Friday that Omega Communications Inc. ended the day with the best offer.
Omega, a Connecticut company, had been criticized as an insider buyer for trying to buy the Internet dial-up services even before Picus filed for bankruptcy protection Nov. 7. Omega said Friday it would pay $1.35 million in cash at the deal's closing, plus allow Picus to keep $125,000 in Internet customer payments.
The final call could be made in bankruptcy court Monday, when a buyer could be approved. Picus expects to close the deal by the end of the month.
"We're hoping for better bids on Monday," said Frank J. Santoro, a Portsmouth attorney representing Picus.
More than a month ago, Omega was the first to step forward to buy the Internet business, which since the filing has dropped from roughly 14,500 to 10,500 customers. Omega offered up $1.55 million -- a little more than $725,000 in on-the-table cash and leases, with the rest to be paid off after two years.
Under that agreement, if Omega had paid off the entire bill within 60 days of the deal's closing, it would have earned a $200,000 discount off the price. With its new offer, since Omega would be shelling out the total amount up front, it would receive the discount, automatically dropping the price from $1.55 million to $1.35 million.
Not surprisingly, Omega's invitation to pay in full made it the preferable choice for cash-strapped Picus -- not to mention its largest creditors.
"The more cash, the better," said Douglas M. Foley, a Norfolk attorney representing General Electric Capital Corporation and NTFC Capital Corporation, two large creditors whose liens against Picus' assets are still disputed. "You don't have to wait for a payment. You don't have uncertainty of collection."
Until Friday afternoon, Picus leaders were leaning toward Encino, Calif.-based Sitestar Corp., a holding company of small Internet service providers in Virginia, including one in Martinsville and Lynchburg.
Sitestar had offered the highest amount, at $1.75 million, $400,000 of which would be handed over at closing and $100,000 absorbed in a lease. The remaining $1.25 million would be paid at 8 percent interest over three years. Sitestar's proposal also included $125,000 for Picus in customer payments.
The other three bids, ranging in structure and price from $175 per customer to more than $1.6 million total, hailed from all over the country. The bidders were Planet Sweep Inc., a New York City company specializing in Internet technologies; Earthlink Inc., an Atlanta ISP; and Atlantic.Net Internet Services, a Gainesville, Fla., ISP.
The Internet sale is just a precursor to that of the significantly larger Digital Subscriber Line business, which allows customers to dial into the Internet and use the phone on a single line. A hearing will also be held later this month on whether to auction off Picus' equipment and furniture.
Before the Internet bidding began, creditors expressed concern over Omega's offer. They said because Omega's owner, Charles Cocuzza, was also Picus' vice president of ISP operations, this was an insider deal that may have shaved down the real value of the business.
But the other companies had set forth similar prices, laying those fears to rest.
"You just want to make sure he didn't have the advantage," said Jonathan L. Hauser, a Norfolk attorney representing Picus' Official Unsecured Creditors Committee. "As a result, he brought his price up. So far, the process has worked.'
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(c) 2001, The Virginian-Pilot, Norfolk, Va. Distributed by Knight Ridder/Tribune Business News.
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