City won’t convert Datacom loan into stockThe city’s Growth Fund Committee decided against approving a recommendation to convert the outstanding balance on loans to Datacom International Inc. into company stock during a city Growth Fund meeting in Grand Forks.
The city’s Growth Fund Committee decided against approving a recommendation to convert the outstanding balance on loans to Datacom International Inc. into company stock this afternoon during a city Growth Fund meeting in Grand Forks.
As part of the original agreement with the company the city has the right to convert the unpaid principal and interest on the loans into Datacom common shares at the price of $1 per share.
The Growth Fund Committee’s decision was instead to stay put with the loan, partially because of the potential risk of becoming a stockholder and the city possibly losing some of that investment if the stock value declined.
“If we don’t do anything and they make more money, we would still get paid,” said Hal Gershman, the president of the city council.
Had the Growth Fund decided to convert the outstanding balance into stock, it would have authorized the use of an internal fund to reimburse the Economic Development Administration revolving loan fund amount owed by the company.
A request was also made to compile more updated financial statements on the company.
A private investor has offered to inject $2 million in equity and other assets into the company in return for a minority interest, but the proposal includes Datacom eliminating debt on its balance sheet to ensure that the new equity invested is used for business expansion, not repaying debts.
According to a staff report prepared for the meeting, the company plans to add an additional 80 employees in North Dakota and northwestern Minnesota by the end of 2015, using Grand Forks as a base for its operations in this area. But those plans are contingent on the infusion of capital into the company.
Datacom received a six-month extension to repay the city in June.
The company owes the city more than $125,000 in an unpaid loan and interest.
Datacom missed its first loan payment to the city in April.
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