March 30, 2001
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Advanced Radio Bankruptcy Spooks Winstar Investors
By CAROL S. REMOND and CHRISTINE NUZUM
Of DOW JONES NEWSWIRES
NEW YORK -- Investors sold off debt, and to a lesser extent, equity of Winstar Communications Inc. (WCII) Friday, after being spooked by the bankruptcy filing of another broadband provider, Advanced Radio Telecom Corp. (ARTT).
Winstar's creditors took the lead in the selloff, bringing the price of the company's $600 million worth of 12.75% senior notes due 2010 to about 25 cents on the dollar, down from about 35 cents a day earlier.
Winstar's shares, meanwhile, lost about 5.5% of their value, closing at $2.16 a share.
The fact that bondholders, some of Winstar's most senior investors, expect to lose about 75 cents of each dollar loaned to the company indicates growing concerns about the telecommunications firm's future.
Rumors abounded on Friday, including doubts about Winstar's vendor facility with Lucent Technologies Inc. (LU). Speculation also included the possibility that Winstar may be seeking debtor-in-possession financing, which would signal that the company is preparing for some sort of restructuring.
"The only thing I can see is that if they've violated the covenants of their bank debt, the banks may not let them draw. That could be a reason for them to be looking for DIP," a hedge fund manager said.
A spokesman for Winstar declined to comment on Friday's rumors.
Analysts took the market activity in stride and said that they would, like most investors, reserve judgment until Winstar files its annual report, which is expected by Saturday.
Heavy Debt Load A Concern
On paper, Winstar looks like it has enough cash to last through the rest of the year. The company had about $302.7 million in cash and cash equivalents at the end of September and another $53.5 million in easily negotiable short-term investments.
Winstar's most recent quarterly filing shows that the company burned through about $368 million in the first nine months of 2000.
What has investors particularly worried is Winstar's heavy debt load. The company's regulatory filing shows about $3.4 billion in long-term debt. Winstar paid $95.6 million in quarterly interest on its debt in the third quarter of 2000.
Concerns about whether the company will be able to continue servicing its debt, especially in a market environment where it's unlikely to be able to raise new cash, have been mounting.
Rating agency Standard & Poor's put Winstar's "B-minus" unsecured debt rating on credit watch with negative implications earlier this month. The agency said in a release that it was worried about Winstar's increased reliance on vendor and bank debt over the past year.
Winstar secured a new $1.15 billion senior credit facility from a group of commercial banks last year. Amounts drawn under the credit facility, which is now fully tapped, are secured by substantially all of Winstar's assets.
Winstar's bank debt was trading at about 59 cents on the dollar Friday.
Winstar's stock has lost 82% of its value in the last month. |
