It's Chapter 11 Time, Again

By Susan Rush
from BroadbandWeek Direct, April 23, 2002

Following in the footsteps of rivals Global Crossing Ltd., Flag Telecoms and 360networks, Williams Communications Group Inc. is seeking Chapter 11 bankruptcy protection from its creditors.

The wholesale telecommunications provider voluntarily filed for bankruptcy protection to restructure and cut its debt by roughly $6 billion.

Earlier this month, Williams warned that a Chapter 11 filing might be in its future when it released revised 2001 losses. In a 10-K filing with the SEC, the company said its lenders had informed the company that it may be in default under its bank credit facility. "This condition raises substantial doubt about WCG's ability to continue as a going concern," the company stated in the SEC filing.

"After considering all options, it was determined that a Chapter 11 financial restructuring would be the best method to restructuring the holding company's balance sheet while at the same time protecting the ability of Williams Communications to continue operations without interruption," Williams' President and CEO Howard Janzen said in a statement. Williams says the filing will not disrupt its domestic and international operations. The company's network connects 125 U.S. cities.

Williams says its creditors will back a reorganization plan that is in line with terms outlined in a lock-up agreement. The lock-up agreement, which expires on July 15, calls for all of Williams' pre-petition unsecured claims to be converted into 100 percent of the reorganized company's common stock.

The agreement also requires Williams to raise at least $150 million in additional debt or equity investment before the reorganization plan is approved. If Williams meets the conditions of the lock-up agreement, it can obtain an automatic extension until Oct. 15.

Williams is hopeful that it Chapter 11 filing will strengthen its balance sheet and make it better positioned to succeed over the long-term. The company is fighting an uphill battle - of the several telecom companies that have filed for reorganization under the protective blanket of Chapter 11, few have emerged from the proceedings thus far. Covad Communications and McLeodUSA are among the survivors.