Teligent Files for Chapter 11 Protection
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Failing competitive local exchange carrier (CLEC) Teligent filed for Chapter 11 protection with the U.S. Bankruptcy Court for the Southern Disrict of New York Monday morning.
The announcement comes as no surprise to industry experts, who knew trouble was brewing for the former investment darling long before it failed to meet its past due notice last week on a $350 million payment to creditors.
The Vienna, VA-based provider of voice, digital subscriber line (DSL) and fixed wireless Internet access, was granted a second amendment waiver May 14 from its creditors, The Chase Manhattan Bank, Goldman Sachs Credit partners and others on a $800 million credit facility secured last year.
Yoav Krill, Teligent chief executive officer, assured creditors and shareholders that day-to-day operations would continue while it figures out the best way to reorganize its capital structure.
Company officials said they had secured enough funds from its lenders to continue near-term operations.
Teligent could catch a break from IDT Corp., a long-distance outfit based in Newark, NJ, that's looking to expand outside its national and international long-distance, IP telephony and small-scale Internet access business model.
IDT took a 37 percent ownership stake in the troubled carrier May 4, the same day the company announced its plans to take a 42 percent interest in ICG Communications, another troubled Internet provider. Creditors, looking for a return on their investment, will likely sign off on any deal IDT makes.
How did Teligent come to this turn of events in the first place?
The company made a splash in 1996, when it announced the launch of its integrated voice and data services, especially broadband Internet connectivity, to businesses around the nation. Led by former AT&T Corp. President and Chief Operating Officer, Alex Mandl, and Laurence Harris, MCI Communications senior vice president of law and public policy, the CLEC immediately started raising capital for a nationwide deployment
In 1998, the company announced the launch of its services nationwide. In 14 months, the company opened its doors to business in 600 cities throughout the U.S. Investors came, pumping more money into the coffers. With more than $500 million from investors and a just-signed $800 million credit facility, the company stepped up the pace of its deployment.
It came to a head with its wireless spectrum deals in Germany, France, Spain, Hong Kong and Argentina. The combination of wireless deployment overseas plus data center and DSL rollout in the U.S., coupled with the end of venture capital in 1999, was enough to put and end to the company's empire-building ambitions.
Cracks in Teligent's armor started to show. Despite nearly 500,000 lines installed by the end of 2000, only 35,500 customers were signed up to its voice and land-based data Internet services. It posted an annual $808 million net loss and losses of $436 million in earnings before interest, taxes, depreciation and amortization (EDITDA).
A new chief financial officer, Peter Garahan of Amteva Technologies Inc., was brought in to balance the books in March. Garahan entered as Mandl was walking out the door, forced to resign and replaced by Krill in the beginning of March.