VarTec Telecom Inc., one of the pioneers of the dial-around phenomenon, has filed Chapter 11 bankruptcy protection. Executives say while the company is undergoing reorganization, they are working to provide other business opportunities to the independent representatives who make up the companys Excel MLM sales channel. The company is in talks with a direct sales firm on the subject.
Yesterdays bankruptcy filing includes all 16 of VarTecs domestic subsidiaries, but the company says the move will not impact customers. VarTec is seeking financing from its primary secured creditor, Rural Telephone Finance Cooperative, to continue business operations.
Because of our debt level and competitive pressures in the industry, we had to look at every option available to seek a return to profitability, says David G. Walsh, VarTecs chief restructuring officer. This step gives us liquidity and the opportunity to reposition and reinvigorate the new company. But I will say that the decisions, especially those related to Excel have been extremely difficult. We worked hard to preserve that business model under VarTec, and it just couldn’t be done.
Walsh also cites changes in the telecommunications regulatory climate and the margin compression of its reseller business as other reasons for filing.
Walsh says the company expects day-to-day operations to continue as usual. However, the board of directors has resigned, and a new president and CEO has replaced Chris Chelette. Michael G. Hoffman now is the sole member of the board and head of the company.