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Williams spinoff faces default
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February 4, 2002: 10:20 a.m. ET
Williams Communications to submit plan to banks claiming default; tops 4Q target.
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NEW YORK (CNN/Money) - Williams Communications Group Inc. posted a smaller-than-forecast fourth-quarter loss, although the telecom services provider revealed that some of its banks believe it is in default of loan agreements.
The company said it strongly disagrees with the banks' contention, which it said was due to negative developments in the telecommunications industry, which led the banks to question whether the company can confirm the representations and warranties included in its credit agreement. But it said in order to assure banks of its outlook it agreed to submit to the banks a comprehensive plan for restructuring and de-leveraging its balance sheet by Feb. 25.
It said that seeking bankruptcy protection or diluting current shareholders' stakes in the company is not envisioned as part of the plan.
Shares of Williams Communications (WCG: down $0.38 to $1.04, Research, Estimates) lost more than 20 percent of their value in early trading Monday. Shares of the company's former parent, Williams Cos. Inc. (WMB: down $1.94 to $17.06, Research, Estimates) lost about 10 percent of their value amid concerns that it could be hurt by Williams Communications' problems.
Williams Communications said that its loss excluding special items came to 52 cents a share in the period. That's better than the forecast of a 57-cent-a-share loss by analysts surveyed by earnings tracker First Call. First Call puts the company's loss a year earlier at 13 cents a share. The company gave only per-share results on that basis.
Including special items, the company posted a net loss of $372 million, or 76 cents a share, in the quarter. That included asset sales and other extraordinary gains of $73.2 million, or 15 cents a share, which brought its net loss from continuing operations to $440.8 million, or 91 cents a share, up from the loss of $55.7 million, or 13 cents a share, on the same basis a year earlier.
Revenue totaled $330.3 million, just above the First Call forecast of $329 million and up from $287 million a year earlier.
Separately Monday, Williams Cos. said that due to investor concern about its eventual obligations to Williams Communications it is prepared to substantially expand its planned asset sale program and, if required, issue equity.
"These actions will ensure that Williams retains adequate liquidity and appropriate debt and equity levels to support an investment-grade credit rating -- no matter the amount of our ultimate Williams Communications exposure," Williams Cos. CEO Steve Malcolm said. "We also commit that the steps we are taking will offset any reduction in stockholders' equity created by losses resulting from recognizing these obligations."
Malcolm's statement noted that top credit agencies have reaffirmed Williams Cos.' debt ratings last week, and said his company's maximum exposure would not exceed the previously disclosed pre-tax $2.2 billion. 
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