May 3, 2012
By: John Clark
Capitol Infrastructure LLC, a provider of television and Internet services to multifamily housing projects, is looking for debt relief in bankruptcy court, according to a report from Bloomberg News.
The company, which is based in Cary, North Carolina and is commonly known as Connexion Technologies, has at least $500 million in debt, and it claims that much of its financial malaise is due to an ongoing contract dispute with DirecTV.
Facing decreasing profits during the latest recession, in 2011, the 10-year-old company signed a deal with DirecTV that allowed it to collect commissions from DirecTV customers at its various housing projects.
The company’s business model involves providing phone and Internet services to housing properties that are owned by real estate trusts. Such properties include gated communities, mobile-home parks, and apartment complexes.
Under the terms of the deal with DirecTV, Capitol believed it could save its sinking finances by installing and operating cable, phone, and Internet services and collecting handsome commissions from the media giant.
However, earlier this year, DirecTV canceled several contracts with Capitol, and Capitol claims that its "deteriorating relationship with DirecTV" had a "dramatic negative impact" on Capitol’s ability to meet its debt payments to its various creditors.
In response to this claim, a spokesperson for DirecTV said that Capitol "needs to take responsibility for their current situation" and claimed that the company "properly exercised our right to terminate some contracts for business reasons."
Regardless of who is at fault for the company's struggles, Capitol will soon be closing some of its units and eliminating an undisclosed amount of employees, although it hopes to continue operating some of its units during the bankruptcy process.
As of the end of 2011, the company had 570 full-time employees and annual revenue of almost $70 million, although both of these numbers are likely to take a significant dip in 2012.
Capitol's financial struggles started in 2007, when the collapse of the housing bubble caused the construction of new homes to stop almost completely. Without new housing complexes that needed the installation of media services, Capitol started to lose business at a rapid pace.
Not surprisingly, the company’s biggest unsecured creditor is DirecTV, which claims that Capitol owes it more than $2 million.
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