Despite big-name investors, Winstar Communications Inc. defaulted on senior debt yesterday, even as it disputed Lucent Technologies' default talk about that $600 million Winstar borrowed — and as it pondered bankruptcy.
In a statement, Winstar announced it did not make aggregate interest payments of roughly $75 million on its senior debt securities, due yesterday, although it has 30 days now to make good on it.
Barring that, it has hired The Blackstone Group to advise it on restructuring its debt — some $5.8 billion as of last Dec. 31 — and Winstar announced "the possibility of a reorganization under Chapter 11 of the U.S. Bankruptcy Code, in order to avoid the significant adverse consequences which the above described defaults could cause." Which is why the company won't file its 10K on time, it adds.
The announcement comes 11 days after the company said it would lay off 2,000 people, stop its network expansion, and after it mentioned involvement in several material transactions that led observers to speculate it was for sale. At the time, Qwest Communications International denied interest in buying the telecom.
But Winstar owes money aside from the $75 million and to some pretty big players. The defaults, it says, lead to more defaults on other obligations.
Among others transactions affected by Winstar's plans are the $511 million Credit Suisse First Boston invested last year through two preferred stock offerings and Microsoft Corp.'s $319 million investment in preferred shares last year, The Wall Street Journal reports.
And as to Lucent. "Additionally, Lucent Technologies has declared a default under the terms of the Company's facility with Lucent, which Winstar disputes," Winstar says in a statement.