Williams Communications Group Says Potential Investors Are Highly Interested
May 25, 2002 (Tulsa World - Knight Ridder/Tribune Business News via COMTEX) --
Williams Communications Group Inc., whose bankruptcy reorganization plan
requires it to obtain $150 million in new outside investment, is generating an
"extremely high" level of interest among potential investors, executives say.
Industry analysts and spokesmen for investment firms, however, said the company
may have difficulty raising the money given its impaired condition and the
depressed state of the telecom marketplace.
Analysts said the company's success in raising new capital could be dependent on
the company's operational performance and its ability to satisfy customers.
Chairman and chief executive Howard Janzen said the company seeks a debt or
equity investment from a number of sources that include customers, investment
firms and its former parent, Tulsa-based Williams Cos. Inc.
"We are working diligently to raise the $150 million between now and July 15,"
Janzen said.
Two potential sources of the new investment, however, apparently have turned
thumbs down on the deal.
SBC Communications Inc., the San Antonio-based parent company of Southwestern
Bell and major customer of Williams Communications, purchased 20.2 million
shares, or 4.1 percent, of Williams Communications' common stock at its initial
public offering in October 1999.
SBC's investment, estimated at $500 million, has been written off by the
company, said spokesman Marty Richter.
"We don't have balance sheet exposure at this point, and we don't hold any of
their debt," Richter said. "We have no comment" on whether the company is
considering an investment of $150 million, he said.
Some Williams Communications executives anticipated that Williams Cos. would be
a logical source for the investment until Chairman Keith Bailey announced at the
company's annual meeting earlier this month that the energy pipeline company was
out of the telecommunications business for good.
"Keith's statement still stands," said Williams Cos. spokesman Julie Gentz.
"We're not interested in being in the telecommunications business."
At Williams Communications' bankruptcy filing April 22, it listed assets of
$5.99 billion and debts of $7.15 billion.
Included in its debt is $2.5 billion owed to bondholders, $2.37 billion to
Williams Cos., from which Williams Communications was spun off as an independent
company in April 2001, and $975 million to a consortium of banks.
As part of a restructuring agreement with its lenders, Williams Communications
agreed to pay the banks $200 million out of its $1 billion of cash on April 22,
solicit another $150 million in outside investment and pay the banks another
$100 million.
Tim Coleman, senior managing director of the Blackstone Group, which Williams
Communications has retained as its financial advisor through its bankruptcy
reorganization, said the telecom firm's strong management team, operational
performance and bright future should enable it to attract the investment it
needs.
"Most telecom companies have had a very tough time attracting investors,"
Coleman said. "So far, the interest level has been extremely high.
"We're talking to everybody -- all the logical parties to talk to. The
investment could come in the form of a loan with a second lien, preferred stock
or common stock."
Forstmann Little & Co., a New York buyout firm that has invested more than $10
billion in about 30 companies since its founding in 1978, is not a potential
investor, said spokesman Keil Decker.
"We are not involved," he said.
Roy Winnick, spokesman for Dallas-based leveraged buyout firm Hicks, Muse, Tate
& Furst Inc., said he would not comment on whether the company has been
approached about an equity investment in Williams Communications.
An industry analyst who followed Williams Communications until its bankruptcy
filing, and who didn't wish to be named, said the company will have tough
sledding in its effort to raise $150 million.
"There's nothing out there to indicate that the marketplace will run to give
them the money," the analyst said.
By D.R. Stewart
To see more of the Tulsa World, or to subscribe to the newspaper, go to
tulsaworld.com.
(c) 2002, Tulsa World, Okla. Distributed by Knight Ridder/Tribune Business News |
