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Gaylord council delays consent on RS Fiber sale, seeks more financial and legal analysis
Summary
Councilors heard that RS Fiber has solicited buyers and received a roughly $14 million offer from HBC; members expressed concern about rising debt, unclear creditor priority on bonds and limited disclosure, and asked staff and the city attorney to gather more financial and legal detail before consenting to a sale.
Gaylord City Council members on Monday heard a staff briefing on a proposed sale of RS Fiber Cooperative’s assets and agreed to delay any consent while staff and the city attorney gather more financial and legal information.
Steve, a city staff presenter, told the council that RS Fiber and the Renville–Sibley joint powers board announced the cooperative has sought buyers and that Hawaa Broadband Communications (HBC) submitted a letter of intent offering about $14 million for the company’s assets. Steve said the cooperative reported it had just under $13 million in debt and rising interest costs, and “they basically stated they cannot sustain that level of debt,” warning the cooperative could face default “by the end of the year” without a transaction or restructuring.
Council members pressed for more detail about how a sale would affect municipal bond obligations tied to RS Fiber projects. A speaker identified in the meeting as the city attorney said the council’s legal rights as a creditor are not yet fully understood and noted the city has a franchise agreement that may require a written request from both buyer and seller before any transfer of the franchise. Councilors asked whether creditor priority and bond repayment were factored into the proposed transaction and whether a bankruptcy or a restructuring filing by RS Fiber could yield different outcomes for cities holding related bonds.
Multiple members said the joint powers board released limited information and that the timing gave cities little opportunity to review terms before a de facto approval request. One council member characterized the presentation materials as a “cursory press release” and asked the city attorney and staff to return with a memo explaining alternatives, creditor position, and the pros and cons of consenting to the sale compared with a potential bankruptcy or restructuring.
Council consensus was to place the item back on the agenda for the next meeting after the requested research is complete; no consent vote was taken. Staff said the joint powers board will meet again later this month and that the city must decide whether to consent to the sale before that meeting if it wishes to act.
What happens next: City staff and the city attorney will review financing documents, bond agreements and the franchise language and return with a memo and recommendations at the next council meeting.
