VarTec Telecom, Inc. filed a motion in the U.S. Bankruptcy Court in the Northern District of Texas, Dallas Division, to reject its lease for 1600 Viceroy Drive in Dallas. The petitions for protection under Chapter 11 of the U.S. Bankruptcy Code were filed on, Nov. 1. A hearing on the motion has been set for Dec. 17, 2004.
VarTec Telecom is a provider of local and long distance service. The company offers services to both residential consumers and small business customers in the United States and select countries around the world.
As part of the restructuring and reorganization of the company, the current VarTec board resigned effective upon the filing of the petition for bankruptcy protection and Michael Hoffman was elected and appointed to serve as the sole member of the board and was named president and CEO, replacing Chris Chelette.
"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," said David Walsh, chief restructuring officer of VarTec. "This step gives us liquidity and the opportunity to reposition and reinvigorate the new company."
"We are a company with substantial revenues," said Walsh. "Our goal is to once again be a lean, efficient business but we have to get our cost structure right. The bankruptcy protection gives us time to simplify, reduce company obligations and return to our core business."
VarTec Telecom's lease, which expires September 2015, provides for $3.49 million in annual rental revenue for the building's landlord, Lexington Corporate Properties.
Commenting on the motion, T. Wilson Eglin, CEO of Lexington, the building's landlord, said, "The motion to reject the lease for our Dallas, TX office property was expected. We are actively searching for a new tenant for the property. Nevertheless, we are anticipating a vacancy of the property for most, if not all, of 2005."
"If our revised estimate of $600 million of investment volume for 2005 is achieved, we believe earnings from our expanded acquisition activities have the potential to mitigate the cash flow disruption caused by a vacancy of the Property," Eglin added.."Accordingly, we continue to believe that we can generate funds from operations per share of $1.85-$1.90, as we previously expected. However, as a result of the expected rejection of the lease, we will incur a fourth quarter non-cash charge of approximately $2.8 million due to the write-off of deferred rent receivable and unamortized lease costs."