While bankruptcies have become all too common in telecom over the past two years, last week saw a rare event when ILEC Ntelos filed for Chapter 11.

Ntelos — which provides wireless, DSL, and local service in the Southeastern U.S. — sought protection after announcing in February that it was in discussions with debt holders and that it would not make an $18.2 million interest payment.

With $630 million in long-term debt, the company's drive into markets beyond its incumbent arm led to the filing. A spokesman for Ntelos said the company accrued most of this debt for its acquisition of PrimeCo properties in Virginia, as well as to fund its expansion into new markets.

While an incumbent filing bankruptcy is unusual, it isn't unprecedented, according to Schuyler Carroll, a partner in the Financial Restructuring and Bankruptcy Group with the law firm Arent Fox. For example, Alaska Power and Telephone filed Chapter 11 in December. It's also unlikely that Ntelos' ILEC status will make any difference in how the carrier is treated in court. Carroll said that in today's economy, judges treat carriers of all sizes equally and are hesitant to shut any company down.

Where Ntelos' ILEC status will have an effect is in negotiations with its creditors. Because the company has a stable cash flow, debt holders will be more interested in keeping Ntelos afloat. Recognizing the value of these assets, however, they'll also drive a harder bargain, Carroll said.

“It makes it easier, but the banks want more,” he said. “The company not only understands that its assets are actually worth something, but banks do also.”