Court approves Williams' reorg plan

By Susan Rush
From The October 2, 2002 Edition Of CED Broadband Direct

After six-months in Chapter 11 proceedings, Williams Communications Group Inc. says the pieces of its reorganization plan are falling into place and expects to emerge from bankruptcy this month.

The US Bankruptcy Court for the Southern District of New York approved the reorganization plan which will give unsecured creditors a 54 percent equity stake in the company. For its $330 million investment, Leucadia National Corp. will receive a 44 percent stake. Leucadia will pay $150 million to lower bank debt, with the remaining $180 million will be going to Williams' parent Williams Companies. As part of the plan, Williams Communications will transition to WilTel over the next two years.

Last week, Williams reached an agreement with SBC Communications to continue their long-standing contract. SBC had threatened to pull out of the contract, but Williams protested in bankruptcy court saying it would negatively affect its ability to reorganize by jeopardizing its proposed $150 million restructuring deal with Leucadia.

As is the case in many restructurings, current Williams shareholders will get zip. A securities fraud lawsuit is pending in Tulsa. In the lawsuit, some shareholders allege that the company's directors and officers "knew or recklessly disregarded" the state of the economic environment when Williams Communications was spun off in April 2001. Parent Williams spun off the unit to unload its debt, according to the suit. As part of the restructuring plan, Williams Communications has set aside 2 percent equity to defend itself against the claims.

The reorganized company will form a new nine-member board of directors. Four directors will be selected by a committee of unsecured creditors and four will be selected by Leucadia. The ninth seat will belong to Howard Janzen, CEO of WilTel.