Another broadband bankruptcy?
Broadband provider Williams Communications mulls Chapter 11 filing.
February 25, 2002: 10:43 a.m. ET
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NEW YORK (CNN/Money) - Williams Communications Group Inc. said Monday it is exploring various restructuring options with its creditors that include the possibility of filing for Chapter 11 bankruptcy protection.
The company issued a statement before the market opening Monday saying it believes it has the resources to fund its operations through 2003, and that it is current in all its obligations. But it said it began exploring a Chapter 11 filing Friday after it concluded that "certain institutions other than the banks are not likely to participate in the restructuring process on terms that are beneficial to all stakeholders of the company."
A Chapter 11 filing allows a company to stay in business while protecting it from creditors and potentially letting it shed some debt. The company said it also is considering staff cuts to reduce what it called its "controllable costs" by 25 percent. It also said the negotiations may lead to dilution of current shareholders' stake in the company.
Williams Communications CEO Howard Janzen told CNNfn's Market Call Monday that the company has been better off than many broadband providers, posting increased revenue for 16 consecutive quarters and seeing its network business reach breakeven before interest, taxes, appreciation and amortization. But he said the company has no choice with its current balance sheet and business conditions other than to consider a possible bankruptcy filing.
"Our expectation was that we could strengthen our balance sheet without going through a Chapter 11 process or significantly diluting shareholders," Janzen said. "But it became clear as we worked through what it was going to take to get that done with the parties we were in discussions with, that what's going on in the market today has really impacted their ability to move forward on that basis."
Tulsa, Okla.-based Williams Communications provides broadband communications, such as high-speed data and Internet connections. The sector has seen widespread financial woes due to overbuilding of networks as demand for services have not lived up to earlier projections. Global Crossing filed for bankruptcy protection four weeks ago.
Williams Communications said at the beginning of the month that some of its banks believed it already was in default of loan agreements, although it disputed that contention. It said at the time it would have a new reorganization plan by Feb. 25, and that it was not contemplating a bankruptcy filing at that time.
About 10 percent of Williams Communication was spun-off from energy trader Williams Cos. in October 1999, with an initial public offering price of $23. Williams Communications completed a spin-off of all but 4 percent of the company to its shareholders in April 2001.
But Williams Cos. is the guarantor of $1.4 billion in Williams Communications debt as well as a $750 million network lease for its former unit, and those potential obligations have affected Williams Cos.' credit ratings and delayed the release of its final fourth-quarter financial results.
Shares of Williams Communications (WCG: down $0.33 to $0.18, Research, Estimates) were late opening Monday following the announcement. The shares lost 1 cent in Friday trading to close at 51 cents. Shares of Williams Cos. (WMB: down $1.34 to $14.96, Research, Estimates) lost ground Monday. 
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