[GST awaits Aug. 22 auction, prospective bidders shop assets]
BILL STEWART
VBJ Staff Reporter
Although it may be a long shot, there’s still a chance that
GST Telecommuni-cations could emerge from bankruptcy as a
reorganized company.
That decision will likely rest with a credit committee, a
representative group of GST’s creditors, which is trying to
recover the $1.2 billion in debt that GST accumulated over
the last few years. With 35 companies registered to submit
bids on GST’s assets, it’s a good bet that the creditors will
be able to recover a substantial portion of the outstanding debt.
However, if the largest bid, or bids, fall short of the
credit committee’s expectations, it’s possible the Vancouver
company could stay in business.
When GST declared bankruptcy in May, the company also signed
a letter of intent with Time Warner Telecom to sell its
assets for $450 million, which would have returned
approximately 38 cents on the dollar to GST’s creditors.
However, the credit committee decided that figure was too low
and the deadline for the sale was allowed to pass.
So, it’s unlikely that the bidding for GST’s assets will
start any lower than $450 million. But with the company’s
fiber-optic network worth an estimated $1 billion, the
creditors still might not be able to recoup all the money
they loaned GST.
Originally, the Bankruptcy Court of Delaware, where GST is
incorporated, set July 31 as the deadline for companies to
submit bids. But that deadline was pushed back to Aug. 11 to
give the 35 interested companies more time to assess the
value of GST’s assets. An auction will then be held Aug. 22
in New York.
It’s possible that several companies would bid on just a
portion of GST’s assets. So, it’s conceivable the credit
committee could accept a combination of bids. By breaking up
the assets, it could make them worth more than it would if
they are sold in a package.
It’s virtually anyone’s guess on what might happen. The
people at GST are simply hoping for the best deal possible.
“When we went into bankruptcy, the objective has been to
maximize the value of the assets,” said Kira Higgs, GST’s
director of communications.
In order to submit informed bids, many of the 35 companies
have been allowed to conduct site inspections at GST’s
Vancouver headquarters and its network outposts around the
West Coast. Part of the due diligence process has included
looking at GST’s financial records, and that alone has kept
many of the people busy at the Vancouver office.
“The people in some of our departments are working very, very
hard,” Higgs said. “Every day these companies are calling and
asking for more reports.”
Despite being aced out from its initial takeover attempt,
Time Warner has joined the current due diligence process and
is expected to submit an updated bid. Shortly before Time
Warner’s letter of intent elapsed, AT&T also expressed
interest in GST’s assets. It’s unknown what other companies
are involved, because the court prevents GST from revealing
their identities.
However, Higgs did say that companies are extremely
interested in retaining many of GST’s employees. By acquiring
a network as large as GST’s, most companies would have to
hire additional employees to keep it operating. Many people
figure it would be smart to just keep GST’s employees.
“That’s why we worked so hard to be in open communications
with our employees,” Higgs said. “Because it’s not just our
physical assets. Many of the companies have expressed that
they’re as interested in the employees as they are in the
assets.”
Shortly after GST filed for Chapter 11, which gives it the
opportunity to reorganize, some of the company’s employees
fled for other jobs. But Higgs said it was hardly the mass
exodus that was first reported.
“Have we lost employees? Yes. Was it as bad as it could have
been? Absolutely not,” she said.
However, it certainly helped when the bankruptcy court
approved a plan for GST to dole out $6.1 million in incentive
bonuses to keep its key employees on board.
“I think it’s helped quite a bit,” Higgs said. “I think our
employees have a great deal of confidence and trust in the
leadership they see in Tom Malone (GST’s president and acting
chief executive officer). What Tom is doing in terms of
providing open, honest communication to the employees is
making many of them stay and see GST through this
transition.”
While most of the focus has been on GST’s employees and the
value of its assets, the company’s shareholders seem to have
gotten lost in the shuffle.
Some of them have completely given up hope of ever recovering
any of the money they invested. Others are holding onto the
slim chance that a bidding war could develop between the 35
companies interested in GST’s assets, which could reap a
windfall greater than the $1.2 billion debt.
One group of investors figured its best chance to recoup its
investment was to force GST out of bankruptcy, but an attempt
to file a motion to dismiss apparently failed to get off the
ground.
The lone remaining option, according to some of the investors
who communicate on the Yahoo message board, is to file a
lawsuit against GST’s executives and board of directors for
alleged mismanagement and negligence. |
