Federal Bankruptcy Judge Places Innovative Communication Corporation in Bankruptcy.

CFC/RTFC See Move as "Additional Positive Development"

HERNDON, Va. -- On Friday, September 21, 2007, U.S. Bankruptcy Court Judge Judith K. Fitzgerald placed Innovative Communication Corporation (New ICC) in Chapter 11 bankruptcy over the objections of its principal, Jeffrey

New ICC's parent companies, Innovative Communication Corporation, LLC, (ICC, LLC) and Emerging Communications, Inc. (ECI), and Prosser as an individual have been in voluntary bankruptcy proceedings since July 31, 2006. New ICC, however, had opposed the requests of creditors to submit to its own proceedings. Two weeks ago, the parent companies' Chapter 11 Trustee Stan Springel was granted control over New ICC's common stock, but the creditors still sought bankruptcy court supervision for the company, citing its general failure to pay creditors.

At the same time, Judge Fitzgerald took under advisement conversion of Prosser's personal bankruptcy case from Chapter 11 reorganization to Chapter 7 liquidation, which would appoint a trustee to take charge of Prosser's personal assets. Prosser's creditors, including the Rural Telephone Finance Cooperative (RTFC), have complained that Prosser has refused to cooperate with his creditors and failed to fully and accurately disclose his financial affairs. Under Chapter 7, a trustee would search for and marshal Prosser's assets with the intention of liquidating them for the benefit of his creditors.

"These are additional positive developments in this protracted proceeding," said CFC and RTFC CFO Steven Lilly. "We again appreciate the court's rulings, which move us closer to resolution of this troubled credit issue."

New ICC is a holding company for a number of media and telecommunications ventures, including Innovative Telephone (formerly the Virgin Islands Telephone Company or VITELCO), the Virgin Islands Daily News, and the St. Thomas and St. Croix cable companies. New ICC and its parent companies have been engaged in protracted bankruptcy proceedings with National Rural Utilities Cooperative Finance Corporation (CFC) and its affiliate RTFC, which as of May 31, 2007, had $493 million in credit extended to New ICC and an unsatisfied court judgment in excess of $524 million against New ICC. All loans have been on non-accrual status since February 1, 2005. New ICC has not made debt service payments to RTFC since June 2005. RTFC is the primary secured lender to New ICC. RTFC also holds an unsatisfied court judgment of $100 million against Prosser, who has been in control of New ICC.

National Rural Utilities Cooperative Finance Corporation is a not-for-profit finance cooperative that serves the nation's rural utility systems, the majority of which are electric cooperatives and their subsidiaries. With more than $18 billion in assets, CFC provides its member-owners with an assured source of low-cost capital and state-of-the-art financial products and services.

Rural Telephone Finance Cooperative is a not-for-profit finance cooperative that serves the financial needs of the rural telecommunications industry. RTFC has approximately $2 billion in credit outstanding to its rural telecommunications members and their affiliates and is a managed affiliate of CFC. Both CFC and RTFC are headquartered in Herndon, Virginia.