Winstar Sues, Lucent Scoffs
On the same day, Winstar, a service provider, also filed for Chapter 11 bankruptcy protection in an effort to re-organize its business operations.
The lawsuit, filed in U.S. Bankruptcy Court in Delaware, not only seeks damages but asks for an immediate injunction to force Lucent to cough up more than $90 million it alleges Lucent failed to pay on March 30, 2001.
In the legal filing Winstar expressed disappointment with Lucent.
“Lucent represented that it had the expertise, personnel and financial wherewithal to undertake its obligations under the Supply Agreement... Little more than two years into the five-year agreement, Lucent has shown its promises were hollow.”
But Lucent says that Winstar is in the wrong, not them. "This lawsuit is absolutely frivolous,” says Mary Lou Ambrus, a Lucent spokesperson. "It’s without an ounce of merit. We did not breach any of our obligations to Winstar.”
Although no countersuits have been filed, Lucent publicly pointed the finger right back at Winstar, contending that two days ago Winstar failed to fork over a $75 million debt payment it owed to Lucent.
“They are the ones that breached their financial convenant,” says Ambrus. “They are the ones in payment default with us. Their contention that Lucent caused them $10 billion in damages is ridiculous and has no basis in the law.”
The strategic deal between Lucent and Winstar was struck back in 1998 and originally called for Lucent to provide equipment and services for up to $2 billion, along with financing to help defray the cost. Initially, the contract allowed Winstar to draw down up to $500 million at any one time. Last year, the companies renegotiated their agreement, permitting Winstar to draw down as much as $1 billion. While Lucent won’t say exactly how much Winstar still owes them, reports have circulated that the amount is around $700 million.
In its release, Winstar insisted the bankruptcy filing would have no impact on day-to-day operations.
-- Marguerite Reardon, Senior Editor, Light Reading http://www.lightreading.com