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Time Warner Telecom Picks Up Defunct Fiber Firm

In May cash flow problems, substantial debt, and the inability to secure new financing forced major backbone provider GST Telecommunications to file for Chapter 11 protection in the U.S. Bankruptcy Court for the District of Delaware.

After filing for protection, GST initially signed a letter of intent to sell its assets to Time Warner Telecom Inc.

However, GST allowed the offer to expire while it secured last minute financial resuscitation from Heller Financial Inc. But the court said $125 million was not enough to bring GST back from the dead and it ended up in open auction proceedings to sell off its substantial fiber assets.

Time Warner Telecom this week received approval from the U.S. Bankruptcy Court to purchase all of GST's assets for $690 million. The court approved the definitive purchase agreement between GST and Time Warner Telecom following the auction that concluded at the end of August.

From its base of operations in Littleton, CO Time Warner Telecom has become a leader in delivering converged communications services for businesses over its advanced fiber networks.

Larissa Herda, Time Warner Telecom president and chief executive officer, said the acquisition significantly expands its footprint into attractive markets in the West.

"By the end of 2001, we expect to grow from 22 to 44 markets," Herda said. "This will include offering services in 14 Tier 1 markets and teams are already working on the integration planning process."

As a result of the deal, Time Warner Telecom picks up more than 4,200 miles of local and regional fiber networks in the Western U.S. The purchase includes GST's network operations center in Vancouver, WA connecting socket-layer seven networks, high-performance voice and data switches, and an expansive customer base with Time Warner Telecom.

Herda said its expertise in managing fiber-optic networks would allow it to quickly capitalize on GST's solid infrastructure.

"In addition to integrating GST assets, we will continue our strong growth in existing markets and will launch the seven additional markets we previously announced, between now and the end of 2001," Herda said. "We remain focused on our current operations."

Time Warner Telecom received commitments from its banks to provide $1.2 billion of additional financing for the GST acquisition. David Rayner, Time Warner Telecom senior vice president and chief financial officer said the firm set to aggressively expand its fiber network.

"Our current plans, including the GST acquisition and expansion of its fiber networks, will be fully funded with this financing commitment, operating cash flow and cash on hand," Rayner said.

The acquisition is expected to close within 90 days, depending upon regulatory and other approvals.

Time Warner Telecom constructs local and regional optical networks that deliver last-mile broadband data, Internet access and voice services to businesses. The company currently serves customers in 22 U.S. major metropolitan markets and plans to launch broadband services in Denver, Chicago, Atlanta, Minneapolis and Columbia, S.C. by the middle of next year.



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