Williams Communications' bankruptcy impact

Tuesday, April 23rd 2002, 12:00 am
By: News On 6

After weeks of worry and wondering, Williams Communications has gone bankrupt. The company filed for Chapter 11 bankruptcy at Monday evening at the "holding" company level only.

The "operating" side of Williams Communications is not part of the bankruptcy. That's an important distinction we'll talk more about. News on Six reporter Steve Berg says there are many fine details of the bankruptcy filing. But the bottom line is the company gets a $6-billion monkey off its back.

While the bankruptcy filing is the most obvious sign of the company's troubles, the company said it was also the best way for the company to move forward in the long term. "And the future is certainly, with the removal of this approximately 6 billion dollars in debt is extremely bright."

The various creditors have agreed to take the $6-billion that Williams owes them and convert it into equity. So the creditors become the "new" stockholders. The "old" stockholders, unfortunately, are the biggest losers in the deal. Their stock will be worthless.” There is tremendous concern, there is empathy all of the employees, many of which are shareholders and stockholders, everybody's been impacted by this."

Williams officials say one of the most important points is that its operating side is not part of the bankruptcy. That means their day-to-day business can continue just as it always has. "Employees continue to be paid, in some other companies filings that did involve operating companies, some of those come into question and are regarded by different legal boundaries. They've been allowed some breathing time."

TU business professor Mark Collins says it would have been much tougher for Williams if the operating side was part of the filing. "You literally have to go to the court, to the bankruptcy judge to have it authorized to make payments, and you can't run a business that way."

But the breathing room won't last forever says Collins. Williams Communications will obviously have to start making a profit again, or the company and the new stockholders will be in the same boat as before.

Just paying the interest on all that debt was one of Williams biggest expenses. Collins says getting rid of that will help them turn a profit.