RealTime IT News

Winstar Execs Resign, Bid On Own Company

Looking to benefit from their company's collapse, two Winstar Communications executives have resigned in order to bid on the pieces of the company.

The provider is set to go on the auction block next month.

William Rouhana, former chairman and chief executive officer, and Nathan Kantor, president and chief operating officer, resigned so they can legally post a bid on the company they were ostensibly looking to get out of Chapter 11 bankruptcy earlier this year.

The announcement is an indicator of the bad blood between Winstar executives and its creditors, who will be stuck with the debts accumulated by the failed provider.

Although Winstar officials said they are almost out of debt, the remaining bills will be left to the creditors in the event of a successful Rouhana/Kantor bid. The two would then be able to start anew and free of any debts from the past.

Laura Kline, a Winstar spokesperson, said the company has been working diligently since April to eliminate their debt and that Rouhana's and Kantor's resignation is actually a beneficial step for the company as their bids will drive up the price of the company's core assets.

"They were very close to moving out of Chapter 11," Kline said. "They are just both leaving so they can post their own bid on the core assets of the company, which will make the auction process more competitive."

Taking Rouhana's place is Frank Jules, who is left holding the pieces of the failed New York-based fixed wireless provider.

"I am pleased that a timetable for the auction process has been set, as we continue with our plan to emerge from Chapter 11 as quickly as possible," Jules said. "We have a strong management team in place as we move forward with the auction process and the ultimate sale of Winstar."

Set to lose the most are the investment firms who backed Winstar's $75 million debtor-in-possession emergency financing to pay off equipment giant Lucent Technologies . Just before filing for bankruptcy in April, Winstar had reneged on several payment extensions and went into default.

Kline added that the monies generated from the auction will be divvied up among the assorted creditors, who include Citicorp, Credit Suisse First Boston, The Bank of New York and Chase Manhattan Bank.

Winstar is currently in the middle of a $10 billion lawsuit against Lucent for allegedly failing to meet the obligations of a supply agreement. Kline said the lawsuit is still in the courts and "progressing well."

According to the complaint filed in the courts, "Lucent breached its agreement with Winstar and injured Winstar's ability to complete its broadband network."

Earlier this year, Lucent made headlines when government regulators announced they would be checking the New Jersey-based manufacturers books over complaints of improper equipment sales.