Dec 11, 2001 12:00 PM,

Winstar facing liquidation

Toby Weber

Potential investors have until Friday to line up financing and submit deposits for bankrupt carrier Winstar Communications, according to reports.

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Winstar, a fixed-wireless competitive local exchange carrier (CLEC), declared bankruptcy in April amid a cash crunch and a failed vendor-financing agreement with Lucent Technologies. An auction for Winstar’s assets, which began earlier this month, did not produce a sufficient bid, said a report in The New York Times.

According to the Times, sources close to the process said that there were four bidding groups, none of which had secured sufficient funding for an offer. William Rouhanna, Winstar’s former CEO who resigned last month in order to participate in the auction, submitted a $25 million bid but did not make it past the first round.

Yesterday, a lawyer for Winstar told a bankruptcy judge the auction’s failure meant the company intends to go into Chapter 7 and liquidate its assets.

But the judge ordered Winstar to remain operational and to allow bidders one more week to line up financing, according to the Times. The order followed an FCC statement that several governmental agencies depend on Winstar for service.

Representatives of Winstar did not return phone calls requesting comment.

The general malaise of the market combined with the existence of cash-hungry CLECs that have managed to survive contributed to the lack of interested investors, according to Peter Jarich, director of broadband research for The Strategis Group.

“People would rather go with those folks out there that haven’t had so many doubts surrounding them,” he said.

In addition, the bankruptcy of fellow fixed-wireless CLEC Teligent may also scare away potential investors, he said.

If Winstar liquidates, the company’s assets will still be appealing to some. According to Jarich, there is possible market for fixed wireless among small business and rural customers. There also has been speculation that fixed-wireless spectrum could be used to backhaul third-generation wireless base stations to the network.