From Communications Today:
"Winstar Left To Wish Upon Lucent's Star
By Rodney L. Pringle, rpringle@pbimedia.com
A day after two prominent credit rating agencies cut its debt ratings to junk status, telecom carrier
Winstar Communications' [WCII] survival could depend on an equipment vendor that has its
own problems, analysts said.
"It all comes down to if Lucent is stepping up or walking away," said Ken Hoexter, an analyst with
Merrill Lynch Global Securities. "If Lucent walks away, it puts [Winstar] in a precarious
situation with the markets the way that they are."
Winstar has borrowed $600 million from Lucent in vendor financing. Part of that amount the New
York-based CLEC has used to pay corporate expenses in addition to buying Lucent equipment and
services. Lucent has committed to lend Winstar another $400 million, a portion of which Winstar
has already dipped into.
Winstar has had a week it'd like to forget. On Tuesday, Moody's Investors Services and
Standard & Poor's drastically cut the company's credit rating, affecting more than $6.3 billion of
Winstar debt.
"Even if the company could obtain funding, we do not expect it to generate positive free cash flow
prior to 2003," Moody's said.
On the previous day, Winstar delayed filing its annual report with the Securities and Exchange
Commission because of talks it is having on "certain material transactions."
The company's stock value continued its death spiral, finishing at 41 cents a share at the market
close on Wednesday, well below the share price required for companies to remain on the Nasdaq.
The stock is now off 99 percent from its record high of $66.50 in March of last year.
The Bottom Line
If former Wall Street darling Winstar's hopes depend on struggling Lucent, whose share value has
dropped 86 percent during the past year amid declining sales and a huge debt burden, then its future
is on shaky ground.
Expect the company to provide more bad news in its next SEC filing, and its fortune to get worse
before it gets better, if it ever gets better, in this unforgiving telecom market." |
