Objections Filed to GST Bankruptcy Petition

WILMINGTON, DEL. - A federal judge today granted GST Telecommunications Inc. (www.gstcorp.com) and Time Warner Telecom Inc. (www.twtelecom.com) until June 12 to finalize a bankruptcy sale of all GST's assets to Time Warner Telecom.

The two companies signed a letter of intent on May 17, under which Time Warner Telecom would buy GST's assets for $450 million. GST filed for bankruptcy the same day. The two companies were supposed to present a definitive agreement to U.S. District Court Judge Gregory Sleek in Wilmington, Del., today.

David Heller, the attorney for GST, told the court that the two companies hadn't been able to reach an agreement, and asked for an additional week. Once the court approves such an agreement, it will become the standard by which all future bids for GST's assets will be measured. Heller assured the court, and 30 lawyers assembled in the courtroom, that the bidding process would be open and fair, and that all potential bidders would have access to the same information as Time Warner Telecom, with as much time to consider it.

"As of today, it's open season on this company," Heller said. "We'll entertain all comers."

Many of his hearers are skeptical. After GST filed proposed bidding rules for the court's approval on May 23, creditors, potential bidders, and the U.S. Bankruptcy Trustee all filed formal objections.

AT&T Corp. (www.att.com), which describes itself in its objection as a creditor and a possible bidder, says it won't have enough time to perform due diligence by the June 20 bidding deadline GST suggested in its May 23 motion. AT&T also objects to a provision in GST's suggested procedures requiring bidders to buy all GST assets.

That provision is important, because MBN Communications Inc. (www.mauibiz.com) signed a contract to purchase GST's Hawaiian assets for $76 million in April, and asserts the priority of its claim.

Companies that loaned money to GST to buy equipment object that they have no way of knowing whether they could get a better deal than Time Warner Telecom's offer.

NTFC Capital (www.ntfc.com), for example, also thinks the "accelerated timing" gives Time Warner Telecom an unfair advantage over other bidders, and objects to GST being allowed to decide who is, and is not, a qualified bidder. NTFC claims GST owes it $45 million for hardware purchased since 1996, including eight Nortel Networks (www.nortelnetworks.com) DMS-500 switches.

The Official Committee of Unsecured Creditors - a group set up by the court to represent the interests of such creditors - objects that the proposed break-up fee of $13.5 million is too high. Patricia A. Staiano, the federal bankruptcy trustee, agrees and adds in her objection that no break-up fee should be paid at all until a sale has been consummated.

All these issues have been put off until at least the June 12 hearing.

Judge Sleek, in granting a delay until then, indicated that he was sympathetic with the objectors.

"The court had very grave concerns about the objections filed," he said. "Very, very grave concerns."

Share this article: Email, Slashdot, Digg, Del.icio.us, Yahoo!MyWeb, Windows Live Favorites, Furl
Add this article feed to: RSS, My Yahoo, Newsgator, Bloglines