5. Initial Proposed Decision

On March 9, 2001, the ALJ mailed a draft decision in this matter that denied the application because it found that the acquisition and subsequent transfer of control of Evans Telephone to Evans Holdings and Country Road would be adverse to the public interest. The draft order noted the Commission's concern with Country Road's negative net income, its high proportion of long-term debt relative to equity, and its high percentage of intangible assets.³ Given the additional $42 million in long-term debt needed to finance the proposed transaction, the order found that the financial condition of Country Road could pose a threat to the captive ratepayers of Evans Telephone because the company might be forced to sell assets or seek a rate increase to pay debt obligations from the acquisition. Hence, the draft order found that the proposed transaction would be adverse to the public interest because Evans Telephone's financial condition would not be maintained or improved by the transaction. In denying the application, the draft decision noted that the denial was without prejudice to any future filing by Applicants attempting to show that the ratepayers of Evans Telephone would not be affected in the event of financial difficulties for Country Road.

On March 27, 2001, Applicants filed a petition asking the Commission to set aside submission of this proceeding and receive additional evidence demonstrating that the public interest would be served if Country Road assumed control of Evans Telephone. In a ruling shortly thereafter, the assigned ALJ allowed Applicants to supplement the record of this case, rather than filing an entirely new application, in an attempt to meet their burden of proof that the proposed transaction is in the public interest. The ruling required Applicants to respond to a series of questions on the financing of the transaction and the effect of the transaction on Evans Telephone's finances and ratepayers. The initial draft decision denying the application was withdrawn from the Commission's agenda.