WILLIAMS SCORES BIG, REVIVES WILTEL BRAND

Williams Communications Group got its second chance. With a $330 million infusion from Leucadia National Corp., the fiber carrier is now set to emerge from bankruptcy in the fall, free from most of its debts, the threat of acquisition and the demands of its parent, The Williams Cos.

The carrier plans to put its Chapter 11 filing behind it on Oct. 15, only six months after filing in April — quite a feat for a troubled company that entered bankruptcy with no pre-packaged reorganization plan or emergency funding. WCG also managed to fight off an acquisition attempt by Level 3 Communications, negotiate a deal with its bondholders and outside investors, and sever all ties to its parent, which had been pestering its offspring for $2.3 billion in debt. Perhaps even more amazing was that CEO Howard Janzen survived the entire process with his job intact.

“We've been doing a lot of things right,” said Patti Schmigle, vice president of business development. “The way we started the bankruptcy process was the best way possible.”

Williams' post-Chapter 11 plan calls for it to re-brand as WilTel, an old moniker the group sold to WorldCom but plans to buy back.

Williams claimed it will have $525 million in debt, down from the $6 billion it listed in its Chapter 11 filing. Of the $330 million in new cash, $180 million will go to paying off its Williams Cos. debts, while the remaining $150 million will go into WCG's operational coffers. For its investment, Leucadia gets a 45% stake in the new company, leaving the remaining 55% to be divided among its creditors and shareholders.

“They had to have that $150 million to survive,” said Kate Gerwig, an analyst with Current Analysis. “It seemed to come at just the right time.”

Though WCG may emerge whole in October, Gerwig questioned how long it would stay whole if it doesn't make significant changes to its business plan. WCG traditionally has been a bandwidth wholesaler, though it has made recent overtures to enterprises.

WCG executives claim the wholesale business is still healthy and pointed out that the company continued to operate its network and even offer new services — such as streaming media — during bankruptcy. It also managed to hold onto most of its customer base throughout the process.

“There's still some hesitation out there, but we've been getting strong feedback throughout the Chapter 11 filing,” Schmigle said. “Customers are staying with us.”

But while the carrier may be mining what value there is in the wholesale market, the retail market has plummeted since WCG declared bankruptcy, and there's little guarantee much will change in the market once Williams emerges, Gerwig said. Unless the overall market improves, Williams might find itself in the exact same situation in a few years.

“Yes, they'll come out of Chapter 11 much healthier, but I wonder how they plan to survive,” Gerwig said. “What's fundamentally different about the company?”