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Forbes Magazine Asks: 'Is Innovative Insolvent?'

Oct. 17, 2004 — "Is Innovative insolvent?" asks an article in the Nov. 1 issue of Forbes, the business magazine.
"'It depends on what your definition of insolvency is' says [Lanny] Davis. Clinton couldn't have said it better."
Davis is Jeffrey Prosser's recently hired Washington lawyer who is, according to Forbes, "the smooth-talking… spinmeister to former President Clinton during the Monica Lewinsky days."
The two-page article by Matthew Swibel represents the first major mainland journalistic attention to the Innovative Communication Corporation and its owner since the Wall Street Journal's expose of several years ago. (For the full text of the Forbes piece, click on this link to the article, via Yahoo Finance).
The cheerfully irreverent piece, decorated with a winsome photograph of Prosser, is headlined "Caribbean Splash: How a Nebraska boy built an island empire with other people's money."
It recounts the Prosser story from his first visit to the Virgin Islands as a 25-year-old emissary of some Nebraska investors "interested in buying an alumina plant in St. Thomas" through his partnership with Cornelius Prior, their purchase of Vitelco after an $87 million bid, their split-up, and Prosser's subsequent investments in other telecommunication properties including buying the Belize telephone company for $105 million from Lord Ashcroft and Carlisle Holdings, the British investment firm.
While much of this will be familiar to Source readers, several elements which appear to be new:
– Regarding the relations with ICC's banker, Rural Telephone Finance Cooperative, the article states: "…Innovative has twice offered to restructure loan payments. But the co-op [RTFC] is in no mood to cut deals with Prosser. It wants him removed and wouldn't mind seeing Innovative forced into bankruptcy."
-As to the recent decision by a Delaware court "…holding Prosser and Innovative liable for $220 million…" for underpricing the value of stock held by minority stockholders in the predecessor company to ICC, Forbes said: "He appears to be chastened by the decision. 'The Delaware case made me open my eyes,' he says." As to the substance of the case, the article says: "Prosser considered an appeal but now looks likely to settle for $100 million."
-Innovative is reported as owning three corporate jets, and Prosser is said to be living in Palm Beach with his second wife, Dawn, "while their $14 million St. Croix beachfront mansion gets a makeover."
-The article speculates about the value of ICC: "As a going concern, Innovative's assets might be worth $1 billion, says Prosser. But in a sale like bankruptcy, physical assets would go for maybe $360 million. That's only 65% of its debt to the rural co-op." At this point Forbes asks the question, " is Innovative insolvent?"
-There is a puzzling reference in the article to "Vitelco's…$53 million a year in revenue." This is puzzling as "revenue" is not defined, and because the last publicly reported gross income for the company, in 1997, was $64.7 million, and there have been substantial rate increases since then. On the other hand, revenue might be construed as profits, and this could be compared to the far smaller Vitelco profit level of $16.1 million in 1997.
While the Forbes article was making its way to the nation's news stands, RTFC and ICC were battling on local soil over the question of the phone company's solvency. (See "ICC Hit With Additional Lawsuit").
Footnote: Don't confuse Carlisle Holdings, a British investment organization headed by British Tory politician Lord Ashcroft, the outfit that sold the Belize phone company to Prosser, with the Carlyle Group, the Bush-family connected, American private investment group (ex-Secretary of State James Baker is senior counselor) that owns Hawaiian Telcom.

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