Restructuring & Reorganization
Selected Transactions
 

Date
April 2002

Company Description
WilTel Communications Group Inc. (formerly Williams Communications Group) (“WCG” or the “Company”) offered data, voice and media transport services over its fiber-optic network to customers that included Regional Bell Operating Companies, Interexchange Carriers, international carriers, wireless companies, cable service providers, major Internet service providers and media content owners.

Situation Overview
After its spin-off from former parent, The Williams Companies, WCG had difficulty in meeting its interest and principal obligations as the telecommunications sector experienced a steep downturn in demand and industry-wide overcapacity. Due to this operating environment and the lack of progress in negotiations with its secured lenders, the Company considered various alternatives for a financial restructuring of its $5.8 billion of debt outstanding, including $975 million of bank debt, $2.4 billion of unsecured claims of The Williams Companies, and $2.4 billion of Senior Notes. Blackstone was hired as the Company’s financial advisor to assist in this restructuring.

Transaction Summary
With Blackstone’s assistance, WCG consummated one of the fastest, most comprehensive and successful restructurings in the telecommunications industry. By keeping WCG’s operating entity out of bankruptcy, the restructuring was completed with limited disruption to the Company’s business.

Blackstone assisted WCG in developing a detailed business plan, demonstrating the Company’s future performance by its individual product lines. Blackstone also developed models and debt capacity and valuation analysis models, with which Blackstone developed various restructuring alternatives for the Company.

Blackstone coordinated all interactions among financial advisors, bondholders, banks, new investors and senior management and negotiated on behalf of WCG, culminating in a Restructuring Agreement and a “pre-arranged” bankruptcy filing with support of over 90% of its bank lenders and holders of more than $875 million of its Senior Notes.

As part of the Restructuring Agreement, Blackstone was asked to raise capital necessary to complete the restructure during a time when new capital for telecom companies was extremely difficult to find. The winner of the process, Leucadia National Corporation, invested $150 million and purchased the unsecured claims of The Williams Companies for an additional $180 million, further facilitating a comprehensive solution to the situation. In return for its investment and acquisition of these claims, Leucadia received 44% of the equity of the reorganized company, with existing unsecured creditors owning the remainder.

On September 30, 2002 WCG emerged from bankruptcy with $575 million of debt, down from $5.8 billion, after which the Company changed its name from Williams Communications to WilTel Communications.


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