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Williams Bolts Out of Bankruptcy

Williams Communications Group Inc. emerged from bankruptcy protection on schedule yesterday, with a new name, a much lighter debt load, and with want-ads out for a new CEO (see Williams Emerges as WilTel).

The Tulsa-based carrier, which filed for Chapter 11 on April 22 this year, announced today that it has reemerged from the process as WilTel Communications Group, and that it has slashed its $7.15 billion debt load to a mere $375 million. The company said that it has no other debt obligations besides those related to its headquarters building in Tulsa, from where it will continue operating. The new company has been incorporated in Nevada.

“This is good news for Williams,” says Jeff Kagan, an independent analyst based in Georgia. “It’s a rare second chance to start with a clean slate.” However, he warns, WilTel’s emergence could be terrible news for the industry. “This could be a recipe for disaster if they decide to compete on price. They have an unfair advantage that puts pressure on other companies that haven’t filed for bankruptcy… The last thing we need is a price war in the industry.”

While the lighter debtload will certainly give WilTel a competitive advantage, many observers doubt that it will be enough to carry the new company to profitability.

“Obviously that helps,” says Phil Jacobson, an analyst with Network Conceptions LLC. “But there’s still a lot of capacity and bandwidth in the ground… and still too many carriers. The same pressures are going to come back... Williams will find itself having to reduce prices over and over until it goes out of business again.”

With few signs of a telecom recovery in sight, it is difficult to believe that the growing number of carriers now returning from the dead, after shedding most of their debt in Chapter 11, will succeed in the same market where they've already failed. This is especially true for companies like WilTel, which seems to be emerging with pretty much the same business plan as it had when it was forced into bankruptcy six months ago, Jacobson says.

Williams Communications went under in the first place because of a bandwidth glut that made running its 33,000-mile fiber optic network, connecting 125 cities around the globe, unprofitable. “Carriers’ carriers are still going to have big problems for a long time to come,” Jacobson says. “If these companies keep coming back, the prices are going to continue coming down.”

“If they haven’t done a business-plan revamp,” Craig Johnson, an independent analyst based in Portland, Ore., agrees, “they’re not going to make it. It’s very cutthroat right now.”

WilTel didn’t return numerous calls asking for comment by press-time.

In today’s release, WilTel also announced that CEO Howard Janzen, who has headed the company since its inception in 1995, has resigned. Janzan has also vacated his seat on the company’s board of directors. “…Howard is the major reason for the Company’s rapid emergence from Chapter 11 and for the seamless management of operations and customer care since the Company’s founding and over these difficult past six months,” the board of directors said in today’s statement. “We thank him for his commitment and hard work on behalf of the Company as the Board begins the search for the next leader to continue WilTel’s growth and industry leadership.”

“Starting out with a clean slate both on the balance sheet and the CEO seat is good,” Kagan says. “Of course it depends who they replace him with.”

While changing the company’s name and replacing some of the management at the top will probably add to the new company’s credibility, Johnson says that without changing the business model, it’s not going to be enough. “Everything is so tarnished that it’s going to take periods of time for the tarnish to wear away. Everyone’s in the rebuilding-of-image mode.”

In accordance with the company’s reorganization plan, which was approved by the courts on September 30, all existing Williams Communications shares have been canceled, and 50 million WilTel shares have been issued (see Court OKs Williams Reorg Plan and Williams Settles With SBC). The former company’s unsecured creditors have received 54 percent of the shares, while 44 percent have gone to New York investment bank Leucadia National Corp. The investment bank has invested $150 million in the company and spent another $180 million buying out Williams Companies Inc. claims. Former shareholders of Williams Communications who have filed class-action lawsuits could recover the remaining 2 percent of the new equity, in addition to any money the court might award.

— Eugénie Larson, Reporter, Light Reading
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Mech4 12/4/2012 | 9:32:21 PM
re: Williams Bolts Out of Bankruptcy Wasn't this the 1st generation co. out of the Williams stable? Didn't it then somehow end up with Worldcom thru LDDS?

I especially like the part where they just erased the shareholders' equity.

When will it all end?
BobbyMax 12/4/2012 | 9:32:17 PM
re: Williams Bolts Out of Bankruptcy It is very strange that Williams would be allowed to get out of bankruptcy without paying the debts that it owed to other parties.

Changing its name to Wiltel will not make any difference to its customers. Old habits die hard. Except for the removal a few people, Williams would not change its style of business. An ovious consequence is that Williams will fail again.

Williams kept its namein the trade journals by becoming a test lab for a lot of junky telecom companies. I am sure this recipe would be followed by Williams till eternity. I have no confidence in this company,
gea 12/4/2012 | 9:32:15 PM
re: Williams Bolts Out of Bankruptcy "It is very strange that Williams would be allowed to get out of bankruptcy without paying the debts that it owed to other parties."

No, Booby, it happens all the time. That's the definition of Chapter 11 bankruptcy.

AAL5 12/4/2012 | 9:32:12 PM
re: Williams Bolts Out of Bankruptcy Boobymax said: "I have no confidence in this company"

Who exactly do you think cares what the L.R. 'village idiot' thinks?

TheChief 12/4/2012 | 9:32:08 PM
re: Williams Bolts Out of Bankruptcy What intrigues me is that they incorporated in Nevada. Wonder how many palms they had to grease for that one.

You seem to think that incorporating in Nevada when the Williams' are from Oklahoma is somewhat suspect. For corp that do business in multiple states, they choose to incorporate in a state that will give them the best tax structure. Most of the big corps that have be around for a 100 years or so are incorporated in Delaware.
Bill Johnson 12/4/2012 | 9:32:08 PM
re: Williams Bolts Out of Bankruptcy Yes, you are correct on both accounts.

It will not end. Williams' are one of the wealthiest families in the Tulsa area, if not all of Oklahoma. They will be around for some time and continue to tinker with the telecom space.

What intrigues me is that they incorporated in Nevada. Wonder how many palms they had to grease for that one.
crapshooter 12/4/2012 | 9:32:06 PM
re: Williams Bolts Out of Bankruptcy Williams is able to reduce its debt load from $7.15 billion to $375 million through the most cowardly business practice in America today (drum roll, please): Chapter 11 Bankruptcy Protection!

How many vendors did they completely screw? I am sure that quite a few were forced to shut their doors when the receivables they were owed by Williams turned into a fraction of their true value. They get to restart their engines with a "clean slate."

This whole Chapter 11 business is like having unlimited mulligans in golf; anyone can eagle every hole if you don't count the bad shots.
billyjoebob 12/4/2012 | 9:32:06 PM
re: Williams Bolts Out of Bankruptcy For every carrier that is allowed to recover via Ch.11 and resume the same profitless business model - more time is added to the continued market downturn for telecom.

With no debt to service Williams can push prices down to contend for market share. In order to maintain cusomters competors (without the advantage of debt relief) are forced to match those price reductions. This forces drastic spending cuts, reduces capital expenditures and hastens staff reductions.

They have to die for others to survive and the industry to return to profitability. If there were a few big players with money we might see consolidation perform this function. I don't believe there are any telecom players with sufficient cash reserves, or credit to take over somebody like Williams and make it pay.
gea 12/4/2012 | 9:32:05 PM
re: Williams Bolts Out of Bankruptcy Booby Max as the LR villiage idiot...perfect. I'm still chuckling!
Bill Johnson 12/4/2012 | 9:32:05 PM
re: Williams Bolts Out of Bankruptcy I was being facetious. It is a well known fact that Delaware and Nevada are the 2 main sites for incorporation.
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