Court OKs Loan for Troubled Cable Firm

A federal bankruptcy judge has approved a $2.7-million emergency bank loan to CommuniCom Cable TV, the embattled Culver City firm that serves Culver City and extensive areas of West Los Angeles, including the Hollywood-Wilshire area, Venice and Mar Vista.

The loan, authorized last week by Bankruptcy Court Judge Richard Mednick, will enable CommuniCom to continue serving its 47,000 subscribers at least through June 30, when the company is expected to unveil a new financing plan to carry it through 1985. The loans are being arranged through private lenders under supervision of the Bankruptcy Court.

The court action was the second in three months designed to help put the company back on its feet. In February the company won court approval for a $2.3-million bank loan after filing for protection from creditors under federal bankruptcy laws.

At the time, CommuniCom was believed to be the nation’s first major urban cable system to file for bankruptcy protection. The company, which holds the largest of 14 franchise areas in Los Angeles, reported debts of more than $165 million, which it blamed on a combination of management problems and rising construction costs.

Other Credit Approved

Mednick also authorized $4.6 million in letters of credit that will protect the firm’s existing construction bonds, guarantee about $1.2 million in customer deposits for cable-television converter boxes and enable the firm to pay a new chief executive officer to run the company.

The officer, 52-year-old Richard E. Matthews, described himself in an interview as a specialist in reorganizing companies that have filed for bankruptcy protection. He said he began working with CommuniCom as a consultant in February after handling the successful reorganization of a Los Angeles-based leasing firm.

Matthews, who will be guaranteed a monthly salary of $20,000, plus a $100,000 bonus if he can resurrect the company, said he will direct most of his attention to improving CommuniCom’s much-maligned service record.

Subscribers have complained that the system often provides poor picture quality, that repairmen often fail to show up for appointments and that company officials often cannot be reached by telephone.

“Obviously, we have to do some things to improve,” Matthews said. “We’ll be doing a whole host of things . . . internal training programs, technical work in the field to improve the quality of the signal, upgrading equipment. In total, it should result in customers being much more satisfied.”

Matthews said the loans will help the company carry out that work and enable it to begin adding subscribers in an area that extends from downtown Los Angeles to Venice and includes nearly 300,000 homes and apartments. About 35,000 of the company’s 47,000 subscribers live in West Los Angeles or Culver City, he said.

CommuniCom officials have attributed most of the firm’s financial problems to changing economic conditions and difficulties in completing the system, which was scheduled to have been installed by mid-1981. Today more than 100,000 homes in the franchise area cannot receive the service, according to a Los Angeles official.

High interests rates and difficulty in wiring the system into the Westside’s numerous apartment complexes have been blamed by the company for the slow and costly installation. In 1982, the Los Angeles Department of Water and Power temporarily halted construction and forced CommuniCom crews to rewire areas where the system had caused electrical problems on city-owned utility poles.

“We had to go back over the installations and correct problems,” Matthews said. “We were trying to do too much too fast.”

CommuniCom filed for bankruptcy protection after the collapse of a proposed $200-million acquisition by Denver-based United Cable Television, which operates a cable franchise in the San Fernando Valley. United backed out of the purchase in December.

Matthews said possible buyers are continuing to show interest in the system but that no serious offers are pending. He said CommuniCom is trying to determine how much additional money the firm will need to operate to the end of the year.

In February the firm reported it would need about $10 million in loans during 1985--a figure Matthews described as a ballpark estimate. Terms of the current loans have been worked out among the company’s 240 creditors and the two banks that will share the financing--Security Pacific National Bank and First National Bank of Boston.