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Williams Communications Seeks Chapter 11 Protection

TSC Staff

Williams Communications(WCGR), the high-speed voice and data network spun out of energy company Williams Cos.(WMB) last year at the crest of investor optimism over New Economy telecom, filed for chapter 11 bankruptcy protection Monday under the weight of about $6 billion in debt.

The filing came after Williams Communications reached a deal to distribute its equity to bondholders and Williams Cos., which noted in a statement that it had written down its previous $2.3 billion contingent liability with the subsidiary to $455 million and was otherwise "prepared to deal" with the filing.

The agreement allows Williams Communications to continue operating even if its creditors can't agree on how to divide the equity. The company repaid $200 million of $975 million in bank debt to a group led by Bank of America(BAC) just prior to the filing Monday night.

Williams Cos. said: "It is not possible to speculate regarding the ultimate resolution of WCGR's bankruptcy. As one of three major creditor groups, however, Williams plans to continue to participate in constructive dialogue with the other parties in the hopes that WCGR can work through and emerge from the bankruptcy process in a fashion that yields the maximum possible recovery."

At the end of 2001, Williams Communications had $5.91 billion in debt and $5.99 billion in assets. Williams Cos. claims it is owed about $2.4 billion, which would entitle it to nearly 50% of the equity. The bondholders say they are owed nearly $2.5 billion.