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Gaylord council withholds consent for RS Fiber asset sale, seeks appraisal and financial disclosures
Summary
Gaylord councilors voted to withhold consent for RS Fiber Cooperative’s proposed $14 million sale to HBC, citing concerns that the offer leaves little for municipal bond obligations and that RS Fiber has not provided sufficient financial documentation. The council asked for an appraisal and other substantiating materials before any consent is given.
Gaylord’s City Council on Sept. 18 voted to withhold consent to the proposed sale of RS Fiber Cooperative’s assets to HBC, saying the information provided so far is insufficient to determine whether the transaction protects the city’s bond interests.
City attorney Mark told the council the publicly disclosed offer—reported at about $14 million—appears to leave little or no allocation for creditors including municipalities. "It doesn't appear that they're really even offering any allocation for the city's bond debt," Mark said, urging the council to request an independent appraisal or other financial substantiation before consenting. He noted the cooperative has indicated it could be in default on loans by year-end if no sale occurs.
Councilors raised two linked concerns: that the buyer’s offer may not reflect the cooperative’s true value and that the sale, as presented, would not address the city’s outstanding bond exposure. Council members discussed conditioning consent on a defined contribution to the cities’ bond obligations or, alternatively, voting no and pressing RS Fiber and the buyer for fuller financial disclosures at the joint powers board level.
Councilors also discussed the possibility that RS Fiber might file for bankruptcy if the sale does not go through; several members said that outcome would likely reduce recoveries for municipal creditors. Mark recommended asking RS Fiber to share the appraisal it obtained or other financials that substantiate the offer. Councilors said they would be unlikely to support consent based solely on the one-page offer and press release circulated by RS Fiber.
On a motion recorded by the council, members formally signaled a no vote or a demand for additional information; the council’s direction is effectively a refusal to support the sale at the joint powers board meeting unless RS Fiber provides documentation (appraisal/financials) or makes a demonstrable contribution toward the cities’ bond exposure. The council cited an approximate remaining local bond balance of roughly $1.1 million for Gaylord as background to its request.
Next steps: the council instructed staff and the city attorney to request an appraisal and more detailed financials from RS Fiber and to coordinate with joint-powers counsel (Kennedy & Graven was mentioned as performing creditor-rights work at the joint-powers level). The joint powers board must still record a majority consent for the sale to proceed; Gaylord’s vote will be reported on that body’s tally.
