Williams Communications Group Inc. announced Wednesday a U.S. bankruptcy court has approved an agreement that allows the national wholesale carrier to resolve legal issues with its largest customer, SBC Communications Inc., help clearing the way for confirmation of a reorganization plan.
The U.S. Bankruptcy Court for the Southern District of New York approved a stipulation agreement with SBC that “resolves change of control issues related to the company’s 2001 spin-off from its parent, The Williams Companies, and its current restructuring,” according to Williams Communications in a news release.
SBC, which serves 4.3 million long-distance customers using the backbone network and software of Williams Communications, sought to modify a Master Alliance Agreement the companies signed in 1999 in a legal maneuver that threatened to jeopardize the ability of Williams Communications to emerge from bankruptcy.
But now Williams Communications says it has resolved the issue and is on track to emerge from bankruptcy this fall.
“Williams Communications and SBC continue to be committed to a mutually beneficial business relationship,” says Howard Janzen, CEO of Williams Communications Group. “Now Williams Communications and SBC will move forward and build on their strategic alliance.”
The stipulation agreement includes amendments to the Master Alliance Agreement. An SBC spokesman declined Wednesday to comment on the amendments, referring questions to public court documents that could not be immediately obtained.
SBC issued a prepared statement Wednesday supporting Williams Communications.
“SBC Communications Inc. and Williams Communications Group Inc. and their affiliates executed agreements that resolve outstanding issues regarding the companies' strategic relationship and clear the way for WCG's reorganization plan …. SBC is confident that WCG's reorganization plan will allow the company to quickly emerge from bankruptcy with strong financial backing, ensuring its long-term ability to support SBC's growing long-distance business.”
Williams Communications, based in Tulsa, Okla., announced in late July it was on target to emerge from bankruptcy by Oct. 15 after reaching an agreement to secure a $150 million investment through New York-based diversified holding company Leucadia National Corp.
Under an amended reorganization plan, Williams Communications would eradicate approximately $6.5 billion in claims and emerge from bankruptcy with around $525 million in debt. Leucadia would invest $150 million in the company and fork over $180 million to settle the claims of The Williams Companies against Williams Communications.
Williams Communications filed for Chapter 11 bankruptcy-court protection in April. Despite several consecutive quarters of network services growth, last year the company posted a net loss of $3.8 billion, or $7.86 per share, and wrote down the value of its assets by $2.9 billion.
