ANCHORAGE - When Alaska Power & Telephone Co. bought an interest in paving company Summit Alaska Inc. last year, the move was supposed to provide stability through diversification, but the strategy backfired.
AP&T filed for Chapter 11 bankruptcy reorganization last week, and the Port Townsend, Wash.-based utility fingered Summit as the dead weight that dragged it down.
Anchorage-based Summit filed for Chapter 7 liquidation in federal Bankruptcy Court last week.
Power and telephone customers will not be affected by AP&T's bankruptcy filing, executives said. In Juneau, AP&T offers pager services.
AP&T's main business is providing power and telephone services in rural Alaska. Now AP&T is focused on maintaining these core operations, said president Robert Grimm, and planning to pare away anything else.
"It was terribly disappointing to see one sour investment, Summit, essentially destroy a lot of people's lifelong efforts to build up the company," said Grimm, who has been with the company 30 years.
AP&T bought a 39 percent interest in Summit last year for $1.2 million, according to the utility's 2001 annual report. That year Summit did $42 million in road construction, gravel sales and other contracts, while posting a $448,000 profit. Summit's high-profile projects include work on the current construction at Anchorage's international airport.
AP&T also provided equipment loans and guaranteed $8.4 million in Summit debt, the annual report said. Summit turned out to be extremely undercapitalized, focused more on growth than profitability.
"It kind of fell on us like a log," Grimm said.
AP&T finances had deteriorated enough to put it out of compliance with loan agreements at the end of 2001, the annual report said. AP&T got waivers from the lender, cut jobs and still was working to restructure its debt earlier this month, company executives said. In the end, Grimm said, AP&T couldn't get all of its creditors to agree, so the company made the Chapter 11 filing that holds off its creditors to give it time to reorganize.
Grimm said the plan now is to rebuild AP&T around its still-healthy subsidiaries, which are excluded from the proceedings.
Subsidiaries include Alaska Power Co., Alaska Telephone Co., Bettles Telephone Inc., North Country Telephone Inc., AP&T Long Distance Inc., AP&T Wireless Inc., and wholesalers BBL Hydro Inc. or Goat Lake Hydro Inc. They operate along a swath of Alaska from Hyder in Southeast to Bettles above the Arctic Circle.