Bloomberg News

Capitol Infrastructure, Pay TV Provider, Files Bankruptcy

April 27, 2012

Capitol Infrastructure LLC, which provides television and Internet services to multifamily housing projects, filed for bankruptcy, blaming in part a contract dispute with DirecTV.

Capitol, based in Cary, North Carolina, operates under the name of Connexion Technologies. It listed debt of as much as $500 million, including at least $87.7 million in secured loans, in court papers filed yesterday in U.S. Bankruptcy Court in Wilmington, Delaware.

After a five-year turnaround effort, the company concluded earlier this year that its “deteriorating relationship with DirecTV and their overall corporate complexity made it highly unlikely the debtors would be able to obtain adequate financing in a timely fashion,” Chief Executive Officer Glen D. Lang said in court papers.

The company is shuttering some operations and firing employees to “achieve a sustainable level of operations and to maximize value in connection with a sale,” Capitol said in court papers.

“Connexion, and Connexion alone, needs to take responsibility for their current situation,” DirecTV (DTV:US) said in a statement provided by spokesman Robert G Mercer. “Under the terms of our arrangements with Connexion, we properly exercised our right to terminate some contracts for business reasons.”

Video, Internet Service

The 10-year-old company provides video, phone and Internet services to housing properties owned by real estate trusts, such as gated communities, apartment and condominium complexes and mobile-home parks. As of Dec. 31 it had 570 full-time employees and annual revenue of $69.2 million.

The top three unsecured creditors are DirecTV, owed $2.4 million; Level 3 Communications LLC, owed $1.3 million; and Wise Owl Communications Inc., owed $738,000.

Capitol is owned by Capitol Broadband LLC, which isn’t in bankruptcy. Twelve other Capitol subsidiaries also filed bankruptcy.

The company’s financial troubles began in 2007 when the housing crisis caused a slowdown in homebuilding. Capitol’s business model relied on installing and operating cable, telephone and Internet services at new housing projects.

The company installed communications networks in some projects that were later canceled or scaled back, leaving too few customers to make the projects profitable.

Revenue Effort

In 2007, Capitol focused on increasing revenue from the existing housing projects it serviced. That program also failed to generate a profit, so in 2011 the company became a so-called master system operator for DirecTV. That allowed the company to collect commissions from DirecTV customers at its housing projects.

DirecTV canceled multiple contracts with Capitol’s operating units “resulting in a dramatic negative impact on significant parts of the debtors’ cash flow starting in March 2012,” Capitol said.

The company said it will seek approval of a so-called debtor in possession loan so it can keep operating while in bankruptcy.

The case is In re Capitol Infrastructure LLC, 12-11362, U.S. Bankruptcy Court, District of Delaware (Wilmington).

To contact the reporter on this story: Steven Church in Wilmington, Delaware, at

To contact the editor responsible for this story: John Pickering at

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