Winstar Communications Inc., scrambling to secure its future after defaulting on its senior debt, is approaching several major cable companies about buying some or all of its assets, a source familiar with the matter said.
Cable companies including Comcast Corp., Cox Communications Inc. and Charter Communications might be interested in the New York-based broadband provider as they look for ways to increase distribution of their content, investment bankers said.
Winstar did not return calls for comment. A Charter spokesman said the firm does not comment on market speculation, as did a spokeswoman for Comcast. A spokesperson for Cox could not be reached at presstime.
Winstar said in a press release late Monday night that it was unable to make its $75 million interest payment due that day and was considering filing for Chapter 11 bankruptcy protection.
Winstar also said Lucent Technologies Inc., a big lender to the broadband services provider, had declared Winstar in default under the terms of its vendor finance facility – a declaration the telecom upstart disputes. The Post reported on Monday that Lucent had cut access to the $400 million balance of a $1 billion loan Lucent provided to Winstar, which it needed to make its interest payments.
The company has until mid-May to fix its default. However, bankers said that’s unlikely to happen since the defaults by Winstar triggered cross defaults under its agreements with other lenders. The company was relying on its vendor finance facilities to provide it with cash to continue its operations through the end of the year.
Winstar has retained Blackstone Group, an investment bank known for its workout expertise, to advise it on restructuring its debt. Winstar has $6.3 billion in debt and preferred securities, according to rating agency Moody’s Investor Service.
Bankers said even if interested suitors do emerge, it is unlikely that Winstar will be able to sidestep a reorganization under Chapter 11 of the U.S. Bankruptcy Code.
Meanwhile, rating service Fitch Inc., which downgraded Winstar’s credit ratings yesterday following Winstar’s announcement, said senior secured creditors will likely recover between 50 and 90 percent of the value of their obligations. That amounts to about $2 billion, according to Fitch. There is little likelihood of any recovery for senior unsecured note-holders, the rating agency added.
Winstar’s shares dropped 21 cents, or 60 percent, to 14 cents yesterday.