more news WCGR:
Williams Communications May Buy Houston-to-Washington Fiber-Optic Network
Mar 12, 2002 (Tulsa World - Knight Ridder/Tribune Business News via COMTEX) --
Williams Communications Group Inc., the wholesale broadband provider that's
considering a Chapter 11 bankruptcy filing as part of restructuring options, is
exercising its option to acquire a $750 million Houston-to-Washington, D.C.,
fiber-optic network.
But Williams Communications, which has leased the network during the past three
years from a consortium of Wall Street banks, is purchasing an asset it won't be
paying for, officials said.
Under a September 1999 agreement between Williams Communications and its
then-parent company, Williams Cos. Inc., the former parent is obligated to pay
for the $750 million in fiber assets if Williams Communications exercises its
network purchase option. Williams Communications was spun off as an independent
company from Williams Cos. last April.
Steve Malcolm, president and chief executive of Williams Cos., said the purchase
option guarantee was factored into the company's recent earnings, balance sheet
and liquidity numbers that were reported to the Securities and Exchange
Commission and shareholders.
"In the event we need to perform on this obligation, we have developed more than
sufficient financial capacity to do so," Malcolm said.
The purchase, which is expected to close March 29, means Williams Cos. will
receive an unsecured term note of Williams Communications for about $750
million, said Deborah Trevino, spokesman for Williams Communications.
"When the agreement was entered into three years ago, (Williams Cos.) took it
upon themselves, but it is our decision to exercise the option now," Trevino
said. "We are getting something we didn't have, and we're not having to put out
cash to get it.
"In that sense, it strengthens our position and limits our outward cash flow" in
network lease payments.
Under pressure from lenders to cut its costs and restructure the company,
Williams Communications is cutting 800 jobs from its worldwide work force of
4,000. About 500 jobs will be lost in Tulsa, where the company employs 2,800.
The company, which has $5.16 billion in debt and has yet to record a quarterly
profit, has been given until March 27 to restructure by its lenders. Its options
include reorganization under federal bankruptcy protection, which analysts say
would wipe out most of the equity of 490 million shareholders of its common
stock.
Suspended from trading by the New York Stock Exchange, Williams Communications
is trading, under the stock symbol WCGr, on the over-the-counter market.
Williams Communications stock closed Monday at 21 cents per share, up 6 cents.
More than 15.3 million shares were traded.
By D.R. Stewart
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