Print

Email story

Comment

Email editor

Trinsic files for Chapter 11 bankruptcy

The Tampa telephone company had rousing success in the late '90s but has plummeted into debt.

By Scott Barancik
Published February 13, 2007

It took its stock public and wowed Wall Street. It hired ex-NFL coach Mike Ditka as its national mouthpiece. It quadrupled its staff to nearly 2,000 in one year. It changed its name, expanded into new markets and toyed with its business model.

Trinsic Inc. has tried just about everything to turn a profit since its debut as Z-Tel Technologies in 1998. Nothing has worked, however, and when a key lender threatened to cut off the Tampa telephone company's funding last week, Trinsic filed for Chapter 11 bankruptcy protection.

"We'll actually come out a better company," said Andrew Graham, vice president for legal affairs. The company reported total assets of $27.6-million against debts of $48.3-million.

Z-Tel was a minor phenomenon when it debuted on the Nasdaq Stock Market in late 1999. Though it served only parts of New York at the time, the company's business plan - it bundles local and long-distance telephone service and enhances them with Web-based features - emerged at a time when investors were mesmerized by the Internet.

Z-Tel didn't need to lay cable like AT&T and those other industry dinosaurs. Thanks to the 1996 telecommunications act, whose purpose was to lower rates by fostering competition, the company could lease phone lines from its giant competitors at a government-mandated discount. On its first day of trading, Z-Tel's stock nearly doubled to close at $33.25.

The company quickly muscled into new markets. As its head count multiplied, however, so did its expenses and debt. Management ended up spending several years trying to get out from under the burden by cutting staff and other overhead.

Z-Tel's darkest day came in 2004, when the FCC - under pressure from Big Phone as well as several court rulings - decided to phase out the lease discounts that Z-Tel and others had come to depend on.

The company fought on. It changed its name to Trinsic. It shifted its cost-cutting and debt-cutting efforts into overdrive. When its stock price fell below $1, it temporarily staved off delisting by undertaking a reverse stock split.

But Trinsic's gross margins were permanently squeezed, and like many of its competitors, it never quite rebounded. Former spokesman Ditka, meanwhile, graduated to other businesses, including a line of wines that includes Mike Ditka Kick A - - Red.

As conventional funding vanished, Trinsic turned in early 2005 to Thermo Credit LLC, a New Orleans firm that buys discounted receivables for cash. According to last week's bankruptcy filing, however, even Thermo became "uncomfortable" with Trinsic, whose stock closed Monday at 7 cents per share.

Though its official headquarters are in Tampa, Trinsic moved most of its operations several years ago to Atmore, Ala. It has about 350 people in Atmore, and several dozen in Tampa.

Moving also made financial sense. "The Atmore facility was paid for," said Trinsic general counsel Graham.

Scott Barancik can be reached at barancik@sptimes.com or 727 893-8751.

Trinsic's wild ride

1998

- Z-Tel Technologies debuts

1999

- Stock price nearly doubles on first day of Nasdaq trading

2001

- Payroll quadruples in just one year to nearly 2,000

- Hires ex-NFL coach Mike Ditka as national spokesman

2004

- Unofficially moves headquarters from Tampa to Atmore, Ala., easing the commute of CEO Trey Davis

- Suffers major setback when FCC weakens key competitiveness rule from 1996 telecommunications act

2005

- Begins selling accounts receivable for cash

- Changes name to Trinsic, conducts reverse stock split to avoid delisting

2007

- Files for Chapter 11 bankruptcy protection

Scott Barancik, Times staff writer

[Last modified February 13, 2007, 06:22:30]