RiverStreet - Chapter 11 Case Summary

Business Description

Wilkes Telephone Membership Corporation ("WTMC") is a member-owned, not-for-profit telephone cooperative headquartered in Wilkesboro, NC. Together with its Debtor affiliates (collectively, the "Debtors," and together with their non-Debtor affiliates, the "Company"), WTMC sells fiber broadband, voice, wireless, and security and managed services under the unified "RiverStreet" brand. The Company serves approximately 31,600 residential and business subscribers across predominantly rural Virginia and North Carolina, plus a small number of customers in South Carolina. On October 21, 2026 (the "Petition Date"), the Debtors filed for Chapter 11 in the U.S. Bankruptcy Court for the Eastern District of Virginia.

In many of the communities it serves, the Company is the only wireline broadband or voice provider. It is also a carrier of last resort ("COLR"), which legally obligates it to provide telecommunications services at a just and reasonable rate to any person in its service area who requests them. The Debtors therefore maintain that keeping service running through the Chapter 11 cases is required by law, in addition to preserving going-concern value.

The Company generated revenue of approximately $66 million and EBITDA of approximately $20.6 million in fiscal 2025. For fiscal 2026, it projects revenue of approximately $67.8 million (approximately $45.1 million from customers and approximately $22.6 million from grant and subsidy receipts) and EBITDA of approximately $26.5 million. Government support programs are a material component of revenue. Historically, government funding has also been the principal funding source for both network expansion and ongoing network operational support.

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Corporate History

Cooperative Origins and Expansion

WTMC traces its origins to 1949, when residents of Wilkes County, North Carolina organized to bring telephone service to rural communities that for-profit carriers had bypassed. It incorporated in 1951 as a telephone membership corporation under North Carolina law to serve four exchanges: Champion, Clingman, Boomer, and Lomax.

In 2015, the Company acquired Saluda Mountain Telephone Company, Barnardsville Telephone Company, and Service Telephone Company in North Carolina. In 2018, it acquired Ellerbe Telephone Company, merged with Tri-County Telephone Membership Corporation, and began a significant expansion into Virginia by acquiring Peoples Mutual Telephone Company ("Peoples Mutual"). It went on to acquire Amelia Telephone Corporation ("Amelia Telephone") and New Castle Telephone Company ("New Castle Telephone") in 2024, and Citizens Cablevision in 2025.

Corporate Structure and Ownership

WTMC is the ultimate parent of the corporate family. It directly owns two competitive local exchange carriers ("CLECs"), Wilkes Communications, Inc. and Tri-County Communications, Inc., as well as RiverStreet Wireless Assets, LLC, which holds a Federal Communications Commission ("FCC") spectrum license. WTMC also holds 100% of the voting interests and 83.92% of the economic interest in RiverStreet Parent Holdings, LLC ("RSPH"). The rest of RSPH's economic interest is held by Chief Executive Officer Eric Cramer (10.49%) and Kinetic Broadband Opportunity Fund, L.P. (5.59%).

RSPH owns 100% of RiverStreet Intermediate Holdings, LLC, which in turn owns 100% of RiverStreet Management Services, LLC ("RSMS"). RSMS is the North Carolina limited liability company through which the Company conducts its competitive and expansion operations in North Carolina and Virginia. It does so through subsidiaries that include incumbent local exchange carriers ("ILECs"), the traditional legacy carriers, which maintain COLR obligations, and CLECs, which compete with other carriers for subscribers. The Company also holds minority, non-controlling interests in non-Debtors Responsive Technology Partners, Inc., Visions West, LLC, and RBN, LLC.

As a telephone cooperative, WTMC is owned by its members, who hold membership interests that carry voting rights and allocations of patronage capital credits. Its profits are either reinvested in the Company or allocated to members as capital credits rather than paid out as dividends. Those credits are retired as WTMC's bylaws provide and as the board determines, and they are not a debt payable on demand. Outstanding patronage capital credits were immaterial as of the Petition Date.

Governance and Management

By law, WTMC's members elect its board on an exchange-area basis. One director comes from each of the Lomax, Champion, Boomer, and Clingman exchanges, one from the former Tri-County territory (the Pinetown, Pike Road, and Sidney exchanges), and two are at-large. Directors serve staggered three-year terms, and Jimmie Church chairs the board. Senior management is led by President and CEO Eric S. Cramer, who joined the Company in 2005 and has served as CEO since 2010, along with CFO Sean Socha and COO Michael Brown.

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Operations Overview

As of the second quarter of 2026, the Company's network passed approximately 83,000 locations, approximately 67,000 of them with fiber. Of its approximately 31,600 subscribers, approximately 28,300 take internet service, including approximately 22,700 on fiber broadband. The remaining customers do not take internet service and may subscribe to voice-only and/or security-only services.

The business is split roughly equally between Virginia and North Carolina and runs through four principal segments:

• the legacy Wilkes and Tri-County telephone cooperative exchanges in North Carolina;
• the legacy ILEC exchanges of the Saluda Mountain, Ellerbe, Barnardsville, and Service telephone companies;
• the RiverStreet competitive and expansion markets in North Carolina; and
• the RiverStreet Virginia operations, including the ILEC exchanges served by Peoples Mutual, Amelia Telephone, and New Castle Telephone.

Workforce

The Company employs 136 people, substantially all of whom live and work in the rural Virginia and North Carolina communities it serves. Some employees are covered by one of two collective bargaining agreements, each running from March 1, 2022 through February 28, 2027:

• one between Teamsters Local 61 and WTMC and certain of its subsidiaries (excluding the wireless, security, and Virginia-based subsidiaries);
• one between IBEW Local 1181 and Peoples Mutual and RiverStreet Communications of Virginia, Inc. ("RCVA"), covering technicians based at the Company's Gretna, Virginia facility.

The Grant and Subsidy Funding Model

The Company's fiber expansion has been funded mainly through government grant and subsidy programs administered by the FCC, the Commonwealth of Virginia, the State of North Carolina, and their instrumentalities. Across these programs the Company has been awarded approximately $480 million and has received approximately $188 million to date. The portfolio falls into two categories:

• Reimbursement-based construction grants — Principally the Virginia Telecommunication Initiative ("VATI") and the North Carolina programs. Under these grants the Company spends its own capital first, including matching funds whose amount varies by agreement, and is reimbursed by the granting agency only after the completed work is documented and verified. Awards total approximately $249 million, of which approximately $115 million has been received.
• Recurring federal high-cost support — Principally three FCC programs administered by the Universal Service Administrative Company ("USAC"): the Enhanced Alternative Connect America Cost Model ("E-ACAM"), the Connect America Fund Phase II Auction ("CAF II"), and the Rural Digital Opportunity Fund ("RDOF"). These pay monthly support over a multi-year term, conditioned on interim and final buildout milestones, and are subject to repayment, withholding, or penalty if milestones are missed. Awards total approximately $230 million, of which approximately $73 million has been received.

The Debtors identify three features of this model as central to the cases. First, construction grants reimburse only part of completed work, and recurring support is paid over time against milestones, so the Company must borrow to fund construction before the government pays. Second, both grant types condition funding on buildout milestones measured at regular intervals, so the model depends on continuous construction and customer additions, and any interruption can put existing awards into default. Third, the downside is asymmetric: a defaulted award can bring the loss of future funding, repayment demands for amounts already received, penalties for missed milestones, and draws on letters of credit posted as security.

In Virginia, the Virginia Department of Housing and Community Development ("DHCD") administers VATI. The Company holds awards from the 2022 and 2023 rounds, with the West Piedmont Planning District Commission ("WPPDC") as grantee of record and the Company as co-applicant and service provider. The Company's Virginia award under BEAD, a federal broadband deployment program funded through the National Telecommunications and Information Administration ("NTIA") and administered in Virginia by DHCD, was conditioned on the Debtors securing a performance bond or letter of credit.

In North Carolina, the Company participates in three principal programs administered by the North Carolina Department of Information Technology's Broadband Infrastructure Office ("NC DIT"): Growing Rural Economies with Access to Technology ("GREAT"), Completing Access to Broadband ("CAB 2.0"), and Stop Gap. At the federal level, E-ACAM pays monthly subsidies through December 31, 2038 to ILECs that elected to move to the mechanism in exchange for enforceable commitments to deploy broadband at specified speeds to specified locations. The Company's North Carolina and Virginia ILECs began receiving E-ACAM support on January 1, 2024.

Amounts below are approximate, in millions, and drawn from the Company's unaudited records as of July 2026. The Debtors dispute the repayment demands and other assertions made by the agencies.

Program	Administering Agency	Recipient	Award ($mm)	Received ($mm)	Status
VATI (2022 & 2023 rounds)	DHCD (WPPDC as grantee of record)	RiverStreet Virginia entities	185.2	110.2	Eastern buildout obligations: Company removed; repayment demanded (disputed). Western buildout obligations: transfer to successor provider pending
Virginia BEAD	NTIA / DHCD	RiverStreet Virginia entities	44.0	0.0	Terminated
Appalachian Regional Commission (Patrick County)	Appalachian Regional Commission (county as grantee)	RiverStreet Virginia entities	0.7	0.0	Carved out of VATI 2023 West
North Carolina BEAD	NTIA / NC DIT	RiverStreet North Carolina entities	2.3	0.0	Provisional award; contracts unexecuted
GREAT (Stokes County)	NC DIT	RiverStreet Communications of North Carolina, Inc. ("RCNC")	5.3	2.9	Active and in good standing; no default notices
GREAT (Wilkes County)	NC DIT	Wilkes Communications, Inc.	0.9	0.7	Active and in good standing; no default notices
CAB 2.0 (Camden, Currituck, Stokes, Wilkes)	NC DIT	RiverStreet North Carolina entities	9.4	<0.1	Camden and Currituck forfeited; Stokes and Wilkes active, construction deadline 12/31/26; ~$1 million security deposit per county
Stop Gap	NC DIT	Same counties as CAB 2.0	1.0	1.0	Camden and Currituck forfeited; Stokes and Wilkes active to 12/31/26
E-ACAM (Wilkes, NC)	FCC / USAC	WTMC study areas	129.6	26.5	~$829,000/month; buildout ~85% complete; 50% milestone due 12/31/26 and 75% due 12/31/27
E-ACAM (Amelia / New Castle, VA)	FCC / USAC	Amelia Telephone; New Castle Telephone	25.7	6.4	~$182,000/month; buildout ~13% complete; withdrawn
CAF II (VA)	FCC / USAC	RCVA	32.1	21.7	~$199,700/month; cure deadline 12/31/26, with penalties if 100% of buildout is not met; secured by ~$19.3 million letter of credit
CAF II (NC)	FCC / USAC	RCNC	0.7	0.1	Cure period; penalty anticipated ~April 2027
RDOF (VA)	FCC / USAC	RCVA	39.8	17.3	~$315,000/month through 2031; secured by ~$11.9 million letter of credit
RDOF (other)	FCC / USAC	Peoples Mutual ($1.5 million); a RiverStreet North Carolina entity ($0.7 million); Wilkes Communications, Inc. ($0.2 million)	2.5	1.2	Not currently subject to withholding
Legacy high-cost support	FCC / USAC	WTMC and ILEC subsidiaries	Recurring	Recurring	Non-buildout regulatory support; subject to routine USAC audit processes
Total (approximate)			~479.0	~187.9

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Prepetition Obligations

The Company built its prepetition capital structure around the grant and subsidy model. In October 2023, it refinanced its legacy USDA Rural Utilities Service debt with a senior secured facility from CoBank, ACB ("CoBank") and a syndicate of Farm Credit System lenders. The facility was sized to front construction costs that grant reimbursements were expected to repay.

CoBank Credit Facility

The credit agreement is dated October 31, 2023 (the "Credit Agreement"). WTMC and RSMS are the borrowers, CoBank is administrative agent and issuing lender, and a syndicate of Farm Credit System lenders and participants provides the funding. The Credit Agreement has three facilities, each maturing October 31, 2028. Approximate balances as of the Petition Date, which include approximately $18 million of accrued interest and fees, are:

• Revolving Credit Facility — $35 million, including letters of credit
• Term Loan A-1 — $91 million
• Delayed Draw Term Loan A-1 — $93 million

Every Debtor other than RSPH guarantees the obligations, which are secured by liens on substantially all of the Debtor obligors' assets. The Virginia State Corporation Commission approved recourse caps on the guaranties of the Virginia ILEC subsidiaries:

• Peoples Mutual: approximately $23 million
• Amelia Telephone: approximately $10.7 million
• New Castle Telephone: approximately $3.8 million

The obligations are accruing interest at the default rate, paid in kind.

Letters of Credit and Restricted Cash

The Company's participation in the CAF II and RDOF programs is secured by letters of credit issued under the CoBank facility, with an aggregate face amount of approximately $32 million. If the Company defaults on its buildout obligations under those programs, the FCC may draw on the letters of credit, and any draw would increase the amount owed under the CoBank facility dollar for dollar. The Company also holds approximately $34 million of cash, mostly Virginia and North Carolina grant-related funds, which may not be freely available to fund operations.

Payment Default and Forbearance

The Debtor obligors missed an interest payment in August 2025, triggering an event of default under the Credit Agreement. They then entered into a forbearance agreement with CoBank dated September 19, 2025. The forbearance was extended several times:

• Amendments and restatements on December 31, 2025 and May 20, 2026 set a forbearance termination date of June 30, 2026.
• A June 30, 2026 letter agreement extended the termination date and certain milestone deadlines through July 31, 2026.
• A July 31, 2026 amendment and restatement extended the termination date through September 15, 2026.
• A September 9, 2026 amendment and restatement extended it through October 30, 2026.

The July 31 and September 9, 2026 extensions were each subject to the milestones and conditions set out in the amended agreement.

Unsecured Obligations

The Company's material unsecured obligations include:

• a limited guaranty by WTMC of certain loan obligations owed by non-Debtor Responsive Technology Partners, Inc. to Synovus Bank;
• employee benefit obligations, including participation in a multiemployer defined benefit pension plan sponsored through NTCA-The Rural Broadband Association;
• ordinary-course trade and vendor obligations, including substantial unpaid balances owed to construction contractors and suppliers after the Company paused construction. Collection activity accelerated from the first half of 2026, and as of the Petition Date vendors and other creditors had made payment demands or filed suits seeking more than $35 million;
• claims by state, federal, and local governmental bodies seeking, among other things, repayment of government grants.

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Events Leading to Bankruptcy

From Regulatory Pressure to a Grant-Funded Buildout

In 2011, the FCC began overhauling its universal service and intercarrier compensation regime, requiring rural high-cost companies to recover their costs from their customers. The Debtors say this severely impaired telephone cooperatives' ability to continue without growth, and by 2017 the program changes were putting significant financial pressure on the Company. The COVID-19 pandemic then led federal and state governments to commit unprecedented sums to closing the rural digital divide. The American Rescue Plan Act ("ARPA"), enacted in 2021, resulted in approximately $8 billion being funded to broadband infrastructure projects through state-specific grant programs.

In 2023, backed by federal and state broadband grants and subsidies, the Company committed to an approximately $480 million buildout to extend fiber to approximately 182,000 locations across Virginia and North Carolina. The October 2023 CoBank refinancing was meant to carry the construction until grant reimbursements and recurring federal support repaid the borrowed capital as work was completed and verified. By the Debtors' account, the model worked only so long as construction, reimbursement, borrowing, and customer acquisition moved in lockstep.

The $153 Million Funding Gap

Beginning in 2024, construction costs for both materials and labor rose materially and interest rates climbed. According to the Debtors, the capital markets available to distressed rural telecommunications providers effectively closed. The Company and its advisors put the resulting unfunded capital need at approximately $153 million: the gap between what the committed buildout required and what debt capacity, grant reimbursements, subsidies, and customer acquisitions could cover. Mitigation efforts narrowed the gap but did not close it, and the Debtors saw no realistic way to raise that amount on terms the Company's cash flows could support.

At the same time as the August 2025 payment default, the Company paused new construction across its expansion footprint to conserve cash, and liquidity constraints forced it to halt construction in late 2025. Because every material award required continuous construction progress and new revenue-producing customers, the pause breached buildout milestones across the state grant and federal subsidy portfolio. Awards began falling into default, reimbursements and support payments were suspended or withheld, and corrective-action demands, state grant clawbacks, and reductions in federal subsidies followed. Expected customer revenue also failed to materialize.

Loss of Virginia Grant Access

DHCD held risk-assessment meetings with the Company on its Virginia builds in September 2025 and January 2026, then issued corrective action plan letters on the Virginia buildout obligations in April 2026. In July 2026, DHCD determined that the Company could not secure the financing needed to complete its committed builds. DHCD also removed the Company from its eastern Virginia VATI-funded and ARPA-funded projects and issued repayment demands on those eastern buildout obligations, with a stated deadline of August 2, 2026. The Debtors dispute the demands.

The western Virginia VATI obligations are covered by a non-binding term sheet, entered into in coordination with DHCD, that would transfer them to a successor provider. By mid-2026, the Commonwealth of Virginia had removed the Company from $229.2 million of broadband commitments across twelve counties. DHCD had also directed WPPDC, as grantee of record, to recoup tens of millions of dollars of previously disbursed grant funds from the Company.

On July 16, 2026, DHCD sent a cure letter on the Company's BEAD award with an August 15, 2026 deadline. Among other things, the letter required the Company to show committed funding for the BEAD buildout. On August 18, 2026, DHCD terminated the BEAD agreement for failure to satisfy its conditions precedent. In August and September 2026, DHCD, directly and through various local governmental agencies, told the Company it was referring its claims to the Virginia Attorney General for collection. During the same period, the FCC demanded a plan showing whether the Company would comply with its FCC program obligations or default, so that the affected areas could be funded through other programs.

Federal Subsidy Shortfalls and North Carolina Forfeitures

Because of certain milestone shortfalls, USAC is withholding approximately 25% of the monthly RDOF support otherwise payable to RCVA. USAC has also paid none of RCNC's CAF II support since May 2026. In North Carolina, the CAB 2.0 and Stop Gap awards for Camden and Currituck Counties were forfeited on July 15, 2026.

On October 9, 2026, certain Debtors sent the FCC a written update on their participation in the Virginia RDOF, CAF II, and E-ACAM programs and the Company's inability to complete them. RDOF and CAF II award areas are defined by census block group.

• RCVA and Peoples Mutual said they are defaulting on 42 Virginia census block groups where they were awarded RDOF support to deploy gigabit-speed service, with RCVA returning 36 and Peoples Mutual six.
• RCVA said it is also defaulting on 15 Virginia census block groups where it was awarded CAF II support.

The Company has also decided not to pursue the Virginia E-ACAM buildout obligations and has notified the FCC. Amelia Telephone and New Castle Telephone withdrew from E-ACAM after building 475 locations combined.

The Modified Build Plan

With help from Areté Partners, LLC ("Areté"), the Company adopted a modified build plan (the "Modified Build Plan"). Its aims are to right-size the debt, preserve certain grant programs, drop commitments that would require substantial new capital, and keep operating the locations already deployed. The Company has discussed the plan with DHCD and the FCC. It has also asked the FCC to work with DHCD so that the defaulted RDOF areas, unbuilt CAF II areas, and unbuilt E-ACAM locations can be included in Virginia's second BEAD funding round.

Failed Out-of-Court Financing and Sale Efforts

In June 2025, the Company hired Guggenheim Securities, LLC ("Guggenheim Securities") to evaluate financing and strategic alternatives. In July 2025, Guggenheim Securities began seeking junior capital to fund capital expenditure obligations, mostly in Virginia. That effort was terminated after about three months of outreach for lack of investor interest. A sale process for select assets and operations, launched in November 2025 and again focused mainly on Virginia, ended in April 2026 because potential buyers would not underwrite the Company's construction plan, including taking on select regulatory subsidy obligations.

Guggenheim Securities was re-engaged in April 2026 to run a dual-track process, launched in May 2026. One track sought a stalking horse proposal for substantially all of the Company's assets. The other sought senior secured funding on a best-available-terms basis along with debtor-in-possession ("DIP") financing, and was suspended after approximately seven weeks. In July 2026, the Company continued the sale process and launched another financing process, this time for an exit term loan facility for a reorganized business along with DIP financing. As part of that process, Guggenheim Securities disclosed the Modified Build Plan to all known potential bidders.

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Chapter 11 Filing

The Debtors entered Chapter 11 with a signed stalking horse agreement. Their stated strategy is to sell substantially all of their assets under section 363, rationalize the state grant and federal subsidy portfolio, and keep subscribers' broadband and voice service running without interruption while the business is restructured.

Stalking Horse Sale

On October 20, 2026, the Debtors signed an asset purchase agreement (the "Stalking Horse APA") with OCM Riverstreet Holdings, LLC, an entity formed by Oaktree Capital Management for the transaction (the "Stalking Horse Bidder"). The agreement covers substantially all of the Debtors' assets for $92.5 million plus the assumption of certain liabilities, subject to court approval and to higher or better offers. The Debtors plan to keep marketing the assets after filing, on the timeline proposed in their concurrently filed bidding procedures motion. They may also sell or transfer assets and liabilities outside the Stalking Horse APA to third parties. Assigning FCC licenses or authorizations to an unrelated buyer in a section 363 sale requires FCC approval.

Alongside the sale, the Debtors intend to work with their federal, state, and local funding partners on what happens to the grant and subsidy portfolio. This includes seeking arrangements that recognize support for locations the Company has actually built and delivered. The Debtors aim to do this in a way that keeps service running for subscribers, many of whom rely on the Company as their only provider, and preserves the Company's going-concern value.

DIP Financing and Cash Collateral

The Debtors say their postpetition operations will not, in the near term, generate enough unrestricted cash to fund ordinary-course operations and the costs of the cases. They are seeking a DIP credit facility from CoBank (the "DIP Facility") and consensual use of cash collateral. The DIP motion also asks for liens and superpriority administrative expense status for the DIP lenders, adequate protection for the prepetition secured parties, modification of the automatic stay, and a final hearing. The Debtors have delivered an initial budget to the DIP agent and lenders, showing projected receipts, disbursements, net operating cash flow, and liquidity for each week. The budget will be updated under the DIP credit agreement, and each update becomes the approved budget once the DIP agent signs off.

In May 2026, the Debtors retained Guggenheim Securities to look for DIP financing, and it canvassed third-party capital providers. The Debtors concluded that, unless the existing lenders consented to a priming loan, any third-party DIP would have had to rank junior to the existing secured debt, and no institution was interested in providing that. The Debtors then negotiated the terms of the DIP Facility with CoBank.

Governance and Advisors

Areté's engagement began in May 2026. Under a May 26, 2026 engagement letter with WTMC, Areté Senior Managing Director Stuart Kaufman became WTMC's Chief Strategy Officer, reporting to the board. Kaufman's responsibilities included cash and liquidity oversight, 13-week cash flow forecasting, negotiations with lenders, and evaluating strategic and restructuring alternatives. A June 11, 2026 amendment allowed Kaufman to draw on Areté's full resources. Effective July 31, 2026, Kaufman was appointed Chief Restructuring Officer of each Debtor.

Effective August 1, 2026, James D. Decker was appointed as an independent member of the board or other governing body of each Debtor other than WTMC. Pachulski Stang Ziehl & Jones LLP and Tavenner & Beran, PLC are proposed counsel to the Debtors, Guggenheim Securities is investment banker, and Epiq Corporate Restructuring, LLC is the proposed claims and noticing agent.