A federal bankruptcy court judge ordered Supra Telecommunications
to pay $3.5 million to BellSouth on Thursday for telephone service
it received last month and required the company to make weekly
payments as it moves forward with its Chapter 11 reorganization.
U.S. Bankruptcy Court Judge Robert Mark ruled on BellSouth's
emergency motion, filed last week, asking that Supra pay $26.2
million as a two-month deposit for services it will provide during
its legal battle. While Mark didn't approve that amount, he agreed
with BellSouth's demands that it be paid for its service.
Mark would allow BellSouth to resume its notices to Supra
customers, telling them to look for another local phone service
provider, if Supra failed to make its weekly payments of $1.75
million.
''It's pay as you go, or termination will occur,'' said Mark as
he ruled from the bench Tuesday evening.
The judge rejected, for now, Supra's request that BellSouth give
it access to the computerized system that allows Supra to process
new customer orders.
BellSouth canceled Supra's access in early September, citing
past-due bills. Mark said he would hear testimony Nov. 18 on whether
Supra should regain access to the ordering system.
Supra, based in Miami, is one of BellSouth's largest competitors
in Florida. It leases lines from BellSouth to provide local phone
service to residential and business customers. The bulk of Supra's
customers are in South Florida. The company said it has $6.4 million
in cash remaining.
Mark ruled after two 12-hour days of testimony from executives
with both companies and billing experts. The judge was sorting
through some of the disputed area in Supra's bills from BellSouth as
well as determining Supra's obligations to BellSouth during
bankruptcy. Supra filed for Chapter 11 protection in October after
BellSouth began alerting Supra customers that Supra's service would
be terminated because it had defaulted on its September bill.
Brian Chaiken, Supra's general counsel, said he was encouraged
that BellSouth's October bill has been reduced to $7.5 million from
its initial claim of $13 million.
During the hearing, Supra witnesses said the company is losing
some 1,500 customers a day as its legal battle with BellSouth has
intensified in the past two months.
Chaiken said Supra has about 270,000 customers today, down from
about 350,000 this summer.
Mark will allow the amount of Supra's weekly payments to
BellSouth to be adjusted by the number of its current customers.
Michael Budwick, Supra's bankruptcy attorney, referred his client
as ``a shrinking company.''
Each week, BellSouth will have to tell the court how many lines
it's providing to Supra, and Supra will have to report its weekly
revenue.
''It's been our intention through all this process that we're
paid for our services on a going-forward basis,'' said Joseph Lacher,
BellSouth's Florida president, after the hearing. Lacher was pleased
the judge would allow BellSouth to terminate Supra's service if the
company failed to make the weekly payments.
However, Mark had harsh words for both sides.
He said it was clear that BellSouth had overbilled Supra in the
past, based on this week's testimony and on decisions from various
arbitration panels that have wrestled with Supra and BellSouth
billing disputes.
He also noted that Supra had a poor payment history.
He cited federal court and arbitration decisions that Supra had
never paid what it acknowledged it owed BellSouth, noting in part
that Supra's growth had been financed at BellSouth's expense.
''The debtor didn't even make a good-faith effort,'' Mark said,
to pay its bills.