And according to a GST representative, an insolvent company has the option under a Chapter 11 proceeding to retain or reject contracts made before its bankruptcy filing.
MBN's offer came in April, while GST filed for bankruptcy May 17 under Chapter 11 of the Bankrupcty Act. At that time, GST also announced that it had signed a letter of intent to sell "substantially all" of its assets to Time Warner Telecom Inc. (www.twtelecom.com) for $450 million in stock and cash.
MBN's offer wasn't revealed until earlier this week when the Maui, Hawaii-based company --- which was established specifically to buy GST's Hawaiian business --- issued a press release disclosing its April agreement with GST.
Timothy Georges, MBN's CFO, acknowledges that the deposit required by the contract wasn't made. "The deposit didn't come along for several reasons, most of which you can surmise," he told X-Change magazine yesterday.
GST's bankruptcy petition was filed in the U.S. Bankruptcy Court in Wilmington, Del. Time Warner's signature on the letter of intent is not a bid, which only can be submitted to the court. The court may entertain other bids. Asked if MBN will be in Wilmington when the bidding begins next month, Georges says, "We will be represented."
In Hawaii, GST operates an ISP (GST Hawaii Online) and a CLEC (GST Hawaii). MBN's Georges says he and his partners originally wanted to buy the ISP, but were told last year that GST would sell its Hawaiian operations only as a package.
"So we stepped back and took a look at the whole situation," he says. "A CLEC operation was part of our business plan to build a statewide network so we went back and checked with our funding sources, and they said, 'Go ahead.'"
Georges would not disclose his funding sources, nor would he identify his own company's CEO. He says the CEO prefers to remain unknown for now.
Georges says he is an accountant by profession and before joining GST, he ran the accounting department at the Ritz Carlton Hotel on Maui.
