Updates on Vivaro Corp. Bankruptcy

It has been about three months now since the powerhouse phone card company Vivaro Corporation and it's child companies STI Prepaid LLC, Epana and Kare Distribution entered into chapter 11 bankruptcy protection (filed Sept 5th 2012). The company continues to operate but it is not clear as to how long they can continue to operate in this environment as some of their distributors begin to withhold payments (more about this later). Unfortunately since the initial filing news has been limited and the company representatives mostly tight lipped so I thought I would put out a post with all of the updates I could provide.

• In early September, Vivaro applied for and was granted by the courts the ability to continue to honor it's cards already in the channel.

• In mid September, Vivaro made it known that it was open to a buyout.

• In late September, Gustavo M. De la Garza the President of Vivaro Corporation, steps down from his position as chairman of The American PrePaid Phonecall Association (APPPA) and is replaced by Pete Pattullo, CEO of Network IP.

• According to an article in the Prepaid Press from October, Red Cherry/Sigma Prepaid took over distribution for Vivaro's NY/NJ cards and in contrast to what you would expect with a company in bankruptcy, Vivaro is giving more minutes than advertised in some cases. Most likely to help continue the consumer and distributor trust in their products.

• In early November, Vivaro sued one of it's major distributors Raza Communications over what it claims is $7.4 million in missed payments. No doubt more of these type of lawsuits will follow!

• Numerous lawsuits filed from the companies owed monies are in process against Vivaro.

There are clearly a lot of rumors floating around in the phone card world but I won't dive into those and will stick with the known facts right now. I will post more information as it becomes publicly available!

Is this the End for STI?

Vivaro Corporation, the parent company for STI, filed a voluntary chapter 11 bankruptcy petition this past past week in the NYC bankruptcy court for all of it's telecom related units including: Kare Distribution Inc, STI CC 1, LLC, STI CC 2, LLC, STI Telecom, Inc, STI Prepaid, LLC and TNW Communications.

Reason for Filling
Vivaro's revenues' have dropped by over 40% since 2010 and their total liabilities are double that of their current assets. Their cash flow situation is what forced them to finally to file for chapter 11 protection having slightly less than $150,000 in cash

Who they Owe the Most?
Sprint - $4.5 million dollars
Telecommunication Relay Service - $2.7 million dollars
Telecom Italia Sparkle - $2 million dollars
Verizon - $1.9 million dollars
Level 3 - $1.3 million dollars

How Many Phone Cards are Currently on the Street?
According to the bankruptcy filing, they have about 22 million unused active cards currently on the market representing about $31.2 million face value dollars.

What are Some of their Card Brands?
Digame, Mi Carnal, STI Family, El Chavo, Eroika, STI Edge, and Clarito

How Many Employees Jobs are Currently at Risk?
In total all of the companies listed above has a total of 231 full time employees & 64 part time employees.

What's Next?
It is important to note that chapter 11 does not mean the company is closing down, it just means that they are trying to seek temporary relief from creditors so that they can restructure and hopefully emerge more stable. However, the odds seem to be against Vivaro since most telco's in this position usually end up going to chapter 7 (bankruptcy) within weeks or months. Vivaro has made it clear that they need more time and absolutely cannot have their big creditors shut them down as they need to be able to honor all of the cards currently on the street as failure to continue to provide service for these cards will make a recovery all but impossible. There is a hearing on the motion is scheduled for September 10th.

Stay tuned for updates...

Epana Calling Card Users to Get Discounts on Prescription Drugs!

In a press release Friday, Epana Networks announced that it would be providing a new loyalty program with the cooperation of HealthTrans Inc. , to provide pharmacy discounts to loyal customers of their prepaid calling cards. The program is mainly aimed at US Hispanics who are on average uninsured and would benefit tremendously from a program like this! The program is being tested for now in cities like: Atlanta, Chicago, Las Vegas and Reno (all areas selected for their high concentrations of uninsured Hispanics) and will eventualy be rolled out in other areas as well.

The end users will enroll for free in Club Bienestar and when they make a purchase of the Mi Carnal phone card they will receive points to their HealthTrans pharmacy discounts. The discounts will average 16% on brand drugs and 55% on generic drugs; though discounts can range up to as high as 70%. Even non calling card users can register and receive base discounts through the Club Bienestar website.

Read the full press release on the Epana Club Bienestar program

IDT and EPANA Reach Settlement

In a update to an earlier posting, EPANA, one of the companies named in IDTs lawsuit against the whole prepaid industry, has settled with IDT and has agreed to join forces in helping clean up the prepaid calling card business.

To read all of the details about the settlement go to: http://www.tmcnet.com/usubmit/2007/03/20/2431901.htm

On the other extreme, CVT Prepaid Solutions is standing firm agianst this lawsuit and claiming that they do not engage in such practices and have nothing to hide.

http://biz.yahoo.com/prnews/070319/nym119.html?.v=59

OK so two have made there stance clear and now we have to wait to see about all of the rest of the named parties.

This is turning out to be the most action we have seen in the prepaid calling card business in years!

IDT and Union Telecard Alliance Sue Everyone who is Someone in the Prepaid Calling Card Business

I was shocked when I saw the news on Business Week that IDT and Union Telecard Alliance (their calling card distribution arm) had filed a civil anti-fraud lawsuit against much of what's left of the prepaid industry. The suit claims that various companies have been engaged in deceptive rating practices that prey on consumers to fool them into thinking their products are better and giving an unfair market advantage.

The companies who received the honor include:

1. CVT Prepaid Solutions, Inc.
2. Dollar Phone Corp. (Dollar Phone Services, Inc., Dollar Phone Enterprises, Inc., Dollar Phone Access, Inc.) - this Dollar Phone Guy has a lot of companies!
3. Epana Networks, Inc.
4. Locus Telecommunications, Inc.
5. Total Call International, Inc.
6. STi Phonecard, Inc.
7. Find & Focus Abilities, Inc - Never heard of these guys!
8. VOIP Enterprises, Inc.
9. Telco Group, Inc.

I imagine that it's not just coincidence that the timing of this suit happened to coincide with their Q2 financial results announcement showing that their calling card sales were slumping.

Hey if you can't beat em sue em!

The business does need to be cleaned up, it's just very odd to see it trying to be done this way. It will be interesting to see how this plays out.