Winstar files bankruptcy, sues Lucent

(Telephony) Winstar Communications has filed for Chapter 11 bankruptcy protection and is suing Lucent Technologies for $10 billion, claiming the vendor breached a strategic partnership agreement.

By filing bankruptcy, Winstar, whose portfolio features dial tone and broadband fixed wireless services, intends to create a restructured balance sheet with significantly less debt, allowing the company to continue operations. During the bankruptcy proceedings, Winstar intends to continue providing service to its 30,000 business customers. Representatives from Winstar did not return requests for comment.

The possibility of bankruptcy was revealed on Monday, when the company announced it was considering options to restructure its debt after failing to make about $75 million in interest payments on its senior debt facilities.

The company also said that its facility with Lucent had been declared in default by the vendor, though Winstar denied it had defaulted. In fact, Winstar alleges Lucent failed to meet its contractual obligations in the arrangement.

Winstar claims that, on March 30, Lucent failed make a $90 million payment to the carrier, violating the terms of their partnership and leading directly to Winstar’s bankruptcy filing.

“Lucent breached its agreement with Winstar and injured Winstar’s ability to complete its broadband network,” said a company press release. “Lucent’s breach of its contract with Winstar has forced the company to seek protection under the U.S. Bankruptcy Code.”

A Lucent spokeswoman dismissed the charges as baseless.

“This is absolutely frivolous and without an ounce of merit,” she said. “We did not breach any of our obligations to Winstar. The truth is they are in breach of their financial covenance, and they are in default with us.”