Belly Up

Jan. 7, 2002
What to do when telecoms go bust
It’s not new news. It happens all the time. What I’m talking about is what building owners and professional facilities management firms have dealt with for years: what to do with the stuff that gets left behind when tenants’ businesses go belly up.It isn’t always desks, chairs, and filing cabinets that get left behind. Your telecommunications service provider (TSP), by virtue of the infrastructure of your buildings, qualifies them as tenants. How do you protect yourself and your buildings against the cost, complications, and inconvenience of abandoned telecommunications equipment?In a conversation that I had with Gerry Lavery Lederer, of the Washington, D.C.-based cable and telecommunications law firm of Miller & Van Eaton, P.L.L.C., Lederer offered some good, sound advice to building owners and other facilities professionals.“When tenants go bankrupt, the questions are usually: ‘How do you get the desks that were left behind out of the space? How do you move all the other equipment out? Who is in charge? Who is ultimately liable? Is it abandoned or does it belong to someone else?’ The issues are the same in the world of TSPs. The experience is the same,” explains Lederer. He warns that just because someone has gone bankrupt doesn’t mean that you can assume control of the abandoned equipment. “That’s the quiet, hidden message. I’ve been at programs where [people have] said, ‘Well, I’ll just go take the equipment and I’ll use that as collateral to get my money.’ You can’t do that,” he says.Under Section 554 of the Bankruptcy Code, a debtor can abandon property that is burdensome or of inconsequential value to the bankrupt’s estate. The basis for abandonment might be that the cost of removing each piece of equipment is greater than the salvage value the company could get from selling the equipment in the open market, meaning the equipment has a negative salvage value.There may also be superior liens against the equipment that were filed by the debtor’s bank to secure a business loan. In this instance, the equipment would be susceptible to foreclosure unless the building owner can work out arrangements with the lien holder.A third challenge that exists for building owners is primarily within the fixed-wireless industry. “In the fixed-wireless world, a number of those folks did not pay the contractors that they employed to install their equipment,” explains Lederer. “Laborers have a special protection called a mechanics lien. They’re very easy to request so they happen almost as a matter of right. While that won’t necessarily impact the building owner, if you were looking to transfer ownership of the building you have this mechanics lien that clouds the title. That’s important in this day and age because interest rates are so low that you have a lot of folks refinancing. You can’t do that if you have a cloud on the title.“The answer to all this is that if you address all of these issues and concerns upfront in your license agreement then you are ultimately in a better position. Though this might sound a little like shouting at people to close the door after the horses have all gone, it is certainly a reminder that if you do things the right way to start with, you can avoid many of these complications later on.”Writing these types of clauses into license agreements also argues in favor of security deposits and safety deposits on the part of the companies responsible for the installation of their services’ infrastructure for the cost of the removal of that equipment.Lederer believes that this type of license agreement also helps from an advocacy standpoint in demonstrating to regulators that the whole issue of abandonment is not as simple as the telecom industry would have you believe. “There are some long-term impacts on buildings when someone comes in and deploys infrastructure. If that infrastructure is deployed as a matter of market negotiation, well then everyone understands what those terms and conditions are. If there is deployment pursuant to government mandate, it’s not clear that you can ever really address all of those things satisfactorily.“What we have is sort of this inverse pyramid. Where 18 months ago we had very little demand for broadband and a plethora of providers, now we have increased demand and a scarcity of providers. That’s the real challenge and, to me, is the shift that has happened in this whole market. So while we talk about bankruptcies, the real challenge is ensuring that your building is competitive, and competitive takes on a greater importance in this day and age,” he says.I liked Lederer’s advice, his sense of humor, and his straightforward approach to a problem that has long plagued the industry. Good advice to building owners and other facilities professionals: Close the barn door.Clara M.W. Vangen ([email protected]) is technologies editor at Buildings magazine.

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