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.
