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.
