Qwest Communications International Inc. said Tuesday it has reached an agreement in principle to provide an undisclosed amount of debtor-in-possession financing to bankrupt Touch America Holdings Inc., drop all litigation between the two carriers and agree to continue selling services to each other.
Under the proposed settlement agreement, Touch America will continue to provide Qwest voice, data and transport services in its 14-state local phone territory. Qwest said it also has agreed to acquire certain fiber routes from Touch America.
The settlement agreement, the companies said, also would end all disputes and litigation between Touch America and Qwest, including commercial arbitration and proceedings before the Federal Communications Commission and in federal court. Touch America will not have to pay Qwest $59.6 million as part of an arbitrator's ruling over billing disputes between the two companies. Also Qwest will not owe Touch America $23 million over the sale of the remaining shares in a joint wireless venture.
“This settlement agreement will ensure that we continue with the same quality of service for Qwest and its customers and for all our customers, and it will allow an orderly transition as Touch America winds down its business,” said Bob Gannon, chairman and CEO of Touch America.
The agreement is subject to bankruptcy court approval. The court will not approve the settlement this week nor next week, according to a Qwest spokesperson.
As a condition of its 2000 merger with US West, Qwest sold its long-distance business in the 14-state local territory of US West to Touch America, then a subsidiary of the Montana Power Company.
Last year Touch America sold its utility to NorthWestern Corp. (www.northwestern.com) for $1.1 billion in cash and debt obligations, capping off a series of energy and utility divestitures since October 2000 through its former parent.
Touch America broke from its energy roots in the midst of a three-year meltdown in the telecommunications industry.
In conjunction with its bankruptcy filing last week, Touch America said it had received a commitment for a debtor-in-possession credit facility for $5 million from WLR Recovery Fund II, LP, a fund managed by WL Ross & Co.
A Touch America spokesperson said the Qwest financing included better terms.
Touch America says it has reached an agreement to sell its private line and dedicated Internet businesses to 360Networks Corp. for $28 million and is pursuing the sale of the remaining parts of the company.
For the quarter ending Sept. 30, 2002, the last quarterly filing with the Securities and Exchange Commission, Touch America posted $76.6 million in revenue, including $19.2 million in private line sales and $16.8 million in Internet revenue.
