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Telecom Distressed Assets: Bondholder Beware
A number of backbone carriers and CLECs are now submitting Plans of Reorganization in bankruptcy court. While WorldCom burns, Leucadia and Warren Buffett’s Berkshire Hathaway are among the new telecom distressed asset investors. Are “smart money” plays in distressed broadband carriers leading to successful restructuring? We’ve examined a few plans of re-organization and unfortunately, so far, we believe the answer is “no”.
- By and large, creditors are being asked to approve the same business models as the ones that failed, trimmed by 20-25%
- In the proposed plans, operating expenses exceed core revenues (i.e. transport services) by as much as 30% coming out of Chapter 11
- Carrier success is entirely dependent on additional managed services revenues (which they have never obtained pre-bankruptcy), as much as 10x core transport revenues in 3-5 years
- Submitted plans are falling into one or more of five restructuring pitfalls we outline in our analysis
Download this article:: BondholderBeware.pdf [245.9kb]
1 August 02
