Holding out for a better offer, Advanced TelCom Group walked away from a $13.8 million offer late last week to sell most of its West Coast telephone service to Integra Telcom.

Beaverton, Ore.-based Integra had submitted to the U.S. Bankruptcy Court in Santa Rosa a binding agreement to acquire the customers and assets of ATG following the completion of an auction on May 29.

At ATG’s request, however, the auction of its assets was reopened by U.S. Bankruptcy Court Judge Alan Jaroslovsky so that it could meet with other interested bidders. The judge did approve the sale by ATG of its San Rafael and Concord assets to TelePacific of Los Angeles.

”The Integra deal is currently off of the table,” said Jeannette Mayer, ATG’s director of finance and administration. ”Not to say it’s permanently off of the table. The larger issue is that ATG is working currently with five bidders that are interested in at least as large a part of the business as Integra was. Two of the five are actually sort of interested in buying the business lock, stock and barrel.”

Regardless of who acquires ATG, the company’s transition plan of uninterrupted service will remain in place, Mayer said.

Saddled with $203 million in debt, ATG filed for bankruptcy on May 2 to gain protection from its creditors while it auctioned off its assets. Integra’s agreement, if accepted, would have assured existing ATG customers of continuation of service and provided ATG senior debt and unsecured lenders with the opportunity to salvage some of their investment from the company

”We had the financing and put forth an agreement that was put together according to the terms of the judge,” said John Nee, vice president of marketing for Integra. ”With each passing day, customers and employees leave ATG, and the value of the company is decreasing.”

The next highest bidder is CyberGate Nevada LLC, but the amount of the bidder has not been disclosed. At $13.8 million, Integra had submitted the highest of the 14 bids received. Terms of the agreement called for a payment of $8.5 million in cash and a promissory note of $5.3 million.

While the beleaguered ATG attempts to reorganize its finances, its Bend customers are flocking to other telecommunications providers in the area.

Plagued with voice mail problems that weren’t getting fixed and long waits on the telephone for customer service help, Brent Durbin, owner of The Truck Works in Bend, said he switched his service to Unicom after five years with ATG.

”I just don’t have time,” he said. ”It’s costing me money.” Locked into a five-year contract with ATG, Durbin said he’ll take his chances the contract won’t hold up since ATG isn’t providing him with the service he needs. ”Our business is like any other business,” Durbin said. ”How much do you rely on your phone lines?”

Steve Liebig, general manager of Sun Country Tours, also changed his service after ATG said it would be four weeks delayed switching his company’s long-distance lines to a new location in Sunriver.

”I was kind of in a bind,” said Liebig, who was able to get out of a one-year contract for that portion of his services.

ATG is one of 260 independent telephone companies called ”competitive local exchange carriers,” which formed after the Telecommunications Act of 1996 to take on the Baby Bells. It was founded in 1997 and opened its headquarters in Santa Rosa in 1998.

Lisa Rosetta can be reached at lrosetta@bendbulletin.com.