This would make LPEA a secured creditor for REAnet during bankruptcy proceedings. As a secured creditor, LPEA will stand a better chance to recoup its money if and when REAnet reorganizes. This debt does not include REAnet s losses. The LPEA board meets Wednesday. Empire s Board of Directors opted to cover the line of credit that comes due in August with a 20-year loan from the National Rural Utilities Cooperative Financing Association.
Empire is also responsible for any unpaid interest on the line of credit.
Stephens said the co-op may still give out capital credits over the course of the loan. By law, the co-ops cannot raise rates to make up for a loss from a diversified business, but they can use their available cash, such as capital credits. The interest rate for Empire s loan has yet to be determined, he said. If REAnet should go into Chapter 7 bankruptcy, which requires the company s liquidation, or LPEA and Empire sell their principal interest in the company, the proceeds will be split between the two coops and used to pay down the debt. Empire and LPEA originally started REAnet because U S West refused to build a fiber-optic network in the area.