GST Files for Bankruptcy

The carrier has filed Chapter 11 and will sell $450 million in assets to Time Warner Telecom

May 17, 2000

2 Min Read
GST Files for Bankruptcy

The axe has fallen for GST Telecommunications Inc. (, Nasdaq: GSTX). Less than a week after admitting the depth of its financial distress in a public announcement covered by Light Reading (see GST Is On the Block), the next-generation carrier has filed for bankruptcy.

In a stroke of irony, GST is attempting to sell its remaining assets, valued at $450 million cash, to a fellow alternative carrier: Time Warner Telecom (, Nasdaq: TWTC), an independent provider of voice, data, and Internet services to U.S. business customers. If the deal goes through, Time Warner Telecom, which is 48-percent owned by media giant Time Warner Inc. stands to gain over 6,000 miles of fiber connectivity in the Western U.S.

Time Warner Telecom thinks it can make better use of that fiber than GST. "We're successful. We have an established track record and we've had positive EBITDA since 1999," says Bob Meldrum, senior director of marketing and communications.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is the generally accepted measure of a company's liquidity. And liquidity problems were the major reason GST cited for its downfall.

GST has gotten approval to borrow up to $75 million from Heller Financial Inc. (, a financing company, in order to maintain day-to-day operations until the sale is finalized.

Meanwhile, Time Warner Telecom can perhaps afford to be smug about how it's succeeded where GST failed: A year after going public, it announced first-quarter 2000 revenue of $100.1 million, an increase of 110 percent over the same quarter last year. And the firm's EBITDA is a healthy $23.5 million for the first quarter.

Still, Time Warner can't afford complacency. Its principal shareholder, Time Warner Inc., announced a merger this past January by America Online Inc. . And while the consolidation doesn't directly affect Time Warner Telecom, it may be too soon to predict the final outcome.

Time Warner refused to comment on whether it had initiated the move to buy GST's assets. GST could not be reached for comment.

-- by Mary Jander, senior editor, Light Reading

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