360networks Turnaround Complete

360networks emerges from bankruptcy, planning to make a 180-degree financial turn and rebuild its battered fiber-optic network business.

by ISP-Planet Staff [October 4, 2002]

Vancouver, B.C.-based 360networks, Inc. announced this week that the U.S. Bankruptcy Court for the Southern District of New York confirmed its plan for reorganization, completing the final step in its emergence plan from bankruptcy protection in the U.S.

The plan had received overwhelming approval from the company's senior lenders and 94 percent of the unsecured U.S. creditors, who voted their claims last week. Having previously obtained plan approval from the Supreme Court of Canada on September 4, 2002, 360networks expects to emerge from bankruptcy by the end of October.

360networks will emerge with approximately $100 million of cash and $215 million of bank debt—down from the company's pre-filing debt level of approximately $2.7 billion. The company's business plan does not anticipate requiring any additional capital prior to its debt maturing in five years.

Back in June 2001, the 360networks group voluntarily filed for protection under the Canadian Companies' Creditors Arrangement Act (CCAA) and Chapter 11 of the U.S. Bankruptcy Code. Originally a subsidiary of a private Canadian construction company, 360networks gained international attention when former Microsoft Corp. chief financial officer Maffei took over.

Greg Maffei, 360networks president and chief executive officer, said rebuilding the company has been a painful process for employees, customers and stakeholders, but that he believes the restructuring plans leaves the company well-positioned for the future.

"As the first long-haul telecommunications provider to restructure successfully, we believe that our low debt level, lean cost structure and innovative, focused product set will enable us to be a key player in shaping the industry," Maffei said.

"Throughout the restructuring, we have maintained our operational focus and continue to deliver excellent solutions for our customers," Maffei added. "We see organic growth opportunities in our sector and potentially in the consolidation of carriers, and are confident we have the right team in place to take advantage of these opportunities."

The company also reports that WL Ross & Co. LLC has purchased debt securities of 360networks that represent approximately 10 percent of the new equity and 13 percent of the confirmed debt. 360networks and the private equity firm will partner to consider future acquisitions in the telecom industry.

Additionally, Wilbur Ross, founder and Chairman of WL Ross & Co., will join the board of directors of the reorganized company. Over more than three decades, Ross has built a strong reputation for seizing opportunities to build value in restructured companies. The private equity firm has revamped troubled businesses ranging from steel producers to airlines. Ross said that 360's balance sheet appears to be strong.

"After studying optical fiber network opportunities for more than a year, we have concluded that 360networks presents the most attractive combination of balance sheet strength, network map, technology, proximity to cash flow breakeven and management talent," Ross said. "We see it as a logical base for the imminent industry consolidation."

360networks offers telecommunications services and network infrastructure in North America to telecom and data companies. The company's optical mesh fiber network spans approximately 25,000 miles and connects 48 major cities in Canada and the U.S.

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