Bank lenders told Williams Communications ( WCG) it might be in default on its credit agreement following the recent spate of bankruptcies and big losses in the telecommunications industry. Williams, a Williams Cos. ( WMB) spinoff that runs a high-speed telecommunications network, said it does not intend to file for bankruptcy, but will submit to creditors a plan to reduce the relative amount of debt on its balance sheet. "Due to recent negative developments in the telecommunications industry, the banks are questioning whether the company can confirm the representations and warranties included in the credit agreement," the firm said in a statement. The banks said the purchase by Williams of certain senior redeemable notes may have violated the credit agreement. The telecom industry has been hit hard by a slowdown in capital spending, pricing pressures and stiff competition over the past year. Last week, Global Crossing and McLeod USA both filed for bankruptcy protection, sending shares of rival telecom companies into a tailspin. Williams said it strongly disagrees with the banks, "and that it is not in default under the credit agreement or any other material agreement." Still, the company has agreed to submit a plan by Feb. 25 to "restructure and de-leverage" its balance sheet. This plan "does not include seeking bankruptcy court protection or the substantial dilution of equity security holders," the firm noted. As of Dec. 31, Williams Communications had cash and short-term investments in excess of $1 billion, which the firm believes is sufficient to fully fund its business plan through 2003. Just last week, shares of Williams Cos. plunged after the firm delayed the release of its earnings statement, saying it was assessing financial obligations to Williams Communications, 95% of which it spun off last year. A spokesman at Williams said the issue was one of proper accounting rather than an imminent liability. Williams Communications also announced Monday a fourth-quarter loss of $372 million, or 76 cents a share, down from a loss of $546.6 million, or $1.18 a share, last year. Excluding one-time items, Williams' fourth-quarter loss was 52 cents a share. Thompson Financial/First Call had expected a loss of 57 cents a share. Revenue came in at $330.3 million from $287.0 million a year earlier. Shares of Williams Communications fell 22% to $1.10 while Williams Cos. fell 11% to $16.87.