Consolidated Fears Losing RDOF Funding Over Bank’s Low Rating
By Ted Hearn, Editor of Policyband
Washington, D.C., Jan.19, 2024 – Consolidated Communications fears it could get cut off from a federal broadband subsidy program because the safety rating of its bank has fallen below an acceptable level.
Consolidated, based in Mattoon, Il., obtained a required letter of credit (LOC) from Wells Fargo bank under Federal Communications Commission’s rules established for the Rural Digital Opportunity Fund (RDOF), which in 2020 originally awarded $9.2 billion to dozens of broadband entities.
In a filing with the FCC yesterday, Consolidated reported that Wells Fargo’s Weiss bank safety rating fell to C+. That's one notch below the minimum B- rating required by the FCC for RDOF funding recipients. An LOC with an ineligible bank could halt RDOF payments to the company.
Consolidated is asking for a six-month waiver to continue with Wells Fargo while searching for an eligible bank. It also wants the waiver to allow it to continue receiving RDOF funding needed to fulfill its RDOF buildout requirements.
“Absent [a] waiver for this six-month time frame, Consolidated will face suspension of support, the financial impact of which would curtail Consolidated’s fiber deployment,” the company said in the filing.
Consolidated’s waiver request comes at a sensitive time for the company. On Jan. 31, Consolidated shareholders are scheduled to vote on the company’s plan to be acquired by Searchlight Capital Partners and British Columbia Investment Management Corp. for about $3.1 billion. Some shareholders are protesting that the sale price is too low.
Three years ago, Consolidated secured $58.9 million in RDOF money to serve 27,021 locations in portions of Florida, Illinois, Maine, Minnesota, New Hampshire, Texas, and Vermont. The FCC conditioned the award on the need for an LOC from a qualified bank equal to the amount of RDOF support in the first year.
The Universal Service Administrative Co. (USAC) is charged with reviewing LOCs for compliance and can suspend RDOF recipients with an LOC from an ineligible bank because of a low Weiss score.
This month, USAC notified Consolidated about Wells Fargo’s ineligible C+ rating.
“USAC may be required to withhold all RDOF payments to Consolidated for lack of acceptable LOCs,” Consolidated said in stressing the need for the waiver.
Consolidated noted that Wells Fargo is the third largest bank with $1.7 trillion in assets and a Standard & Poor’s long-term issuer credit rating of A+, and an A- rating from [Fitch] and Moody’s.
“The [FCC’s] interest in securing the funds dispersed to Consolidated will be amply protected during the six-month waiver period by the LOCs issued by Wells Fargo given its demonstrated strength and stability,” Consolidated said.