An internet provider removed from multiple broadband deployment projects after years of delays in Virginia has filed for bankruptcy protection.
RiverStreet Communications of Virginia announced on Wednesday that it “initiated voluntary Chapter 11 proceedings” to reorganize in the Eastern District of Virginia U.S. Bankruptcy Court. In the same news release, the company said that it “entered into an asset purchase agreement” with funds managed by investment firm Oaktree Capital Management.
The news comes about three months after the commonwealth’s broadband office stripped the company, commonly known as RiverStreet Networks, of all its contracts, after RiverStreet left more than 30,000 rural customers without broadband connections, with no plan to finance its unfinished work.
Regional officials continue searching for new providers to take over multiple projects, with federal deadlines in place.
The Wilkesboro, N.C.-based company, with offices in Danville, said in the news release that it is refocusing operations “on its existing customers and footprint.” Its sale “is subject to higher or otherwise better offers, court and regulatory approvals and customary closing conditions.”
RiverStreet was working with the Martinsville-based West Piedmont Planning District Commission on two multi-county projects.
One of the projects was to deliver fiber broadband in Amelia, Bedford, Campbell, Charlotte, Nottoway and Pittsylvania counties. Funding came from a $33.5 million grant that the state administers via the Virginia Telecommunication Initiative, or VATI, largely funded by the pandemic-era American Rescue Plan Act. Another $59.4 million came from match funding that RiverStreet and local government partners provided, according to West Piedmont.
The company completed connections to about 35% of 27,997 potential customers.
Henry, Patrick and Franklin counties, collectively called the West Broadband Project, received an $87 million VATI grant, with $65.4 million in match funding from RiverStreet Networks and local governments.
RiverStreet was to deliver fiber to 14,547 potential customers but completed only 40 connections: 29 in Franklin County, 11 in Henry County and none in Patrick County.
The Virginia Department of Housing and Community Development’s Office of Broadband determined in July that the company was unable to acquire new financing and was therefore incapable of completing its work in the state, even as looming federal deadlines could cost the projects their unspent funds.
Office of Broadband Director Chandler Vaughan said in an email that the housing department is working with legal counsel to recoup state investments from RiverStreet. It is coordinating with affected counties to identify new partners to finish the jobs. The department is coordinating with federal agencies to ensure the counties in question are eligible to receive supplemental funding under the Broadband Equity Access and Deployment program, commonly known as BEAD, money projected to be available early next year, he wrote.
“The Department of Housing and Community Development’s Office of Broadband remains committed to delivering universal service across the commonwealth,” Office of Broadband Director Chandler Vaughan said in an email. “RiverStreet Networks’ bankruptcy is a disappointment to DHCD and the communities the company promised to serve.”
RiverStreet was granted $44 million of BEAD funding for new areas, some of which overlap with Patrick, Henry and Amelia counties. The federal programs are reimbursement-based. Once the money has been spent, the Treasury Department would make good, but RiverStreet found itself in need of further financing to continue its work, company officials have said previously.
The company engaged Guggenheim Securities to help it seek capital, “primarily related to the expansion build-out in the RiverStreet Virginia territory,” but despite contacting dozens of potential investors, it could finalize no new investment, according to documents filed in the bankruptcy court on Wednesday.
Ultimately, RiverStreet received a commitment for about $20 million from its existing lender, CoBank ACB, according to the court filings. That money, along with cash the company generates from its ongoing operations, will support RiverStreet through the Chapter 11 proceedings.
The court filings in part seek court approval to continue business operations, including employee wages and benefits.
“RiverStreet intends to pay vendors and suppliers in full under normal trade terms for all goods and services provided on or after the filing date,” the news release states.
West Piedmont Planning District Commission Executive Director Michael Armbrister said in an email exchange that RiverStreet has 2,080 subscribers among multiple counties included in the projects.
In Bedford County, the provider completed 2,324 locations, according to its website, but it was unclear how many customers have subscribed. Company officials did not answer messages on Wednesday, and a spokesperson said there would be no comment beyond the news release.
“RiverStreet maintains this process will lead to no service disruption for county residents who are RiverStreet subscribers” in Bedford County, county broadband manager John Putney said in a text message. “We certainly hope that proves true.”
Bedford County-based internet service provider ZiTel will work to complete the projects in Patrick, Henry, Franklin and Bedford counties and is a finalist for the contracts in Pittsylvania and Campbell counties, ZiTel’s chief operating officer, Rodney Gray, said in a phone call.
American Rescue Plan Act funding came with a Dec. 31, 2026, deadline, after which the government would keep the money that hasn’t been accounted for. But the Department of the Treasury has given extensions to some projects. Gray has previously said that the project in Patrick, Henry and Franklin counties received extensions to June 30, 2027, on a 2022 contract and to Dec. 31, 2027, on a 2023 contract.
County investments did not receive extensions, however, so ZiTel is focusing on accounting for that money in its upcoming work, he said. Meanwhile, the state attorney general’s office is taking action to retrieve money that the housing department directed to RiverStreet, said Armbrister, of the West Piedmont district.
Amelia, Campbell, Charlotte, Nottoway and Pittsylvania counties have yet to finalize deals with a new ISP.
Bedford County was the first to contract with ZiTel to finish the work left over there and expects it to be complete under deadline, Putney has said. The county learned Wednesday afternoon about RiverStreet’s bankruptcy filing, and officials were not surprised, he said in the text exchange.
Remaining work on the 2022 project is primarily in the New London, Blackwater Road and Huddleston areas, he said, adding that according to broadband office leadership, the RiverStreet filing will have no impact on the agreement among DHCD, West Piedmont and ZiTel.
“Bedford County eagerly looks forward to Zitel beginning this important broadband project and completing it in a thorough, professional, and timely manner,” he wrote, “so these residents can get the high-speed internet they have been waiting for and deserve.”
