What are the concerns regarding the VarTec loan?
CFC’s exposure to VarTec through its affiliate RTFC is secured under a mortgage on substantially all of its assets. Standard & Poor’s, however, is concerned about the lack of hard assets as collateral for both of VarTec’s primary businesses, dial-around long-distance service and competitive local exchange service. CFC, based on information received from a nationally recognized independent consulting firm, determined an appropriate level of reserves for the VarTec loan. However Standard & Poor’s concludes that this view may be somewhat aggressive and could lead to adjustments in the reserve over time. VarTec is experiencing significant competition in its primary businesses and this competition resulted in a significant reduction to cash flow. In addition, recent court rulings have given the incumbent local exchange carrier network owners more control of the prices they can charge to companies leasing elements of the network, which will most likely result in an increase to the cost of op
