================================================================= WINSTAR BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2001 (ISSN XXXX-XXXX) April 19, 2001 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 609-392-0900 FAX 609-392-0040 ----------------------------------------------------------------- WINSTAR BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 24 Perdicaris Place, Trenton, New Jersey 08618, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. Each issue is prepared by Peter A. Chapman, Editor. Subscription rate is US$45 per issue. Reproduction of WINSTAR BANKRUPTCY NEWS is prohibited without permission. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO ORDER A SUBSCRIPTION TO WINSTAR BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF WINSTAR COMMUNICATIONS [00002] COMPANY'S BALANCE SHEET AT DECEMBER 31, 2000 [00003] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING [00004] WINSTAR DEBTORS' CHAPTER 11 DATABASE [00005] LIST OF WINSTAR'S 20 LARGEST UNSECURED CREDITORS [00006] WINSTAR FILES $10 BILLION SUIT AGAINST LUCENT [00007] WINSTAR ISSUES VENDOR AND CUSTOMER Q&A SHEETS KEY DATE CALENDAR ----------------- 04/18/01 Voluntary Petition Date 05/03/01 Deadline for filing Schedules of Assets and Liabilities 05/03/01 Deadline for filing Statement of Financial Affairs 05/03/01 Deadline for filing Lists of Leases and Contracts 05/08/01 Deadline to provide Utilities with adequate assurance 06/17/01 Deadline to make decisions about lease dispositions 07/17/01 Deadline to removal actions pursuant to F.R.B.P. 9027 08/16/01 Expiration of Debtors' Exclusive Plan Proposal Period 10/15/01 Expiration of Debtors' Exclusive Solicitation Period 04/18/03 Deadline for Debtors' Commencement of Avoidance Actions Organizational Meeting with UST to form Committees Bar Date for filing Proofs of Claim First Meeting of Creditors pursuant to 11 USC Sec. 341 ----------------------------------------------------------------- [00000] HOW TO ORDER A SUBSCRIPTION TO WINSTAR BANKRUPTCY NEWS ----------------------------------------------------------------- WINSTAR BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is $45 per issue. Newsletters are delivered via e-mail; invoices, transmitted with each newsletter issue, arrive by fax. Distribution to multiple individuals at the same form is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. To continue receiving WINSTAR BANKRUPTCY NEWS, please complete the form below and return it by fax or e-mail to: Bankruptcy Creditors' Service, Inc. 24 Perdicaris Place Trenton, NJ 08618 Telephone (609) 392-0900 Fax (609) 392-0040 E-mail: peter@bankrupt.com We have published similar newsletters tracking billion-dollar insolvency proceedings since 1990. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF WINSTAR COMMUNICATIONS ----------------------------------------------------------------- WINSTAR COMMUNICATIONS, INC. 685 Third Avenue New York, NY 10017 Telephone (212) 792-9800 Fax (212) 792-9622 http://www.winstar.com Winstar provides broadband services to business customers. These services include traditional telephone service, high-speed Internet access and data transmission, web design and hosting applications, professional services and Office.com(R), a Service From Winstar, the top-ranked online business service for small- and medium-sized businesses. Winstar offers a comprehensive suite of these services across an end-to-end broadband network in the top 60 markets in the United States and a dozen overseas markets, including Amsterdam, Brussels, Buenos Aires, London and Tokyo. Winstar's domestic network combines local and long-haul capacity with voice and data switching facilities and is capable of carrying a substantial portion of customers' communications traffic from point of origin to point of termination. This network consists of: o the nation's largest amount of fixed wireless spectrum, covering more than 80% of the U.S. business market, which Winstar uses to extend broadband network across the "last mile" to customers' buildings; o intracity fiber in 50 of the top 60 domestic markets, covering more than 6,000 delivered or committed route miles, which Winstar incorporates into its network to interconnect hub site buildings and switching and data center facilities; o a nationwide fiber backbone, comprised of four fiber strands covering more than 16,000 route miles, and which connects the top 60 markets; o access rights to connect more than 8,000 buildings, providing Winstar with access to more buildings than any other facilities-based competitive communications provider; and o 34 installed Lucent local and long distance voice switches and 135 installed data switches. Winstar's broadband network allows the Company to offer an integrated suite of communications and information services, including: o local and long distance voice services; o always-on and dial-up Internet access; o ATM, frame relay and IP data transport services; o web hosting and web design and development services; o online business content, including office.com, a service from Winstar, the online business center; o online application hosting services, including Microsoft Office 2000 OnlineSM; o network and applications solutions for vertical business communities; and o LAN and WAN systems integration. Winstar rapidly built a widely available broadband network which to enable the Company to offer broadband services to a majority of the business market in the United States. Winstar's business plan was predicated on a market for broadband services that's projected to grow from approximately $178.0 billion in 1999 to approximately $360.0 billion by 2009. ----------------------------------------------------------------- [00002] COMPANY'S BALANCE SHEET AT DECEMBER 31, 2000 ----------------------------------------------------------------- Winstar Communications, Inc. Condensed Consolidated Balance Sheets at December 31, 2000 (unaudited) ASSETS Current assets Cash and cash equivalents $ 290,983,000 Short term investments 24,702,000 Cash, cash equivalents and short term investments 315,685,000 Accounts receivable, net of allowance for doubtful accounts 225,720,000 Inventories and assets held for sale 98,644,000 Prepaid expenses and other current assets 150,350,000 ---------------- Total current assets 790,399,000 Investments in marketable equity securities 1,425,000 Investments, at cost 174,877,000 Property and equipment, net 2,891,957,000 Licenses, net 477,261,000 Other intangible assets, net 186,865,000 Deferred financing costs, net 89,357,000 Other assets 310,034,000 ----------------- Total assets $ 4,922,175,000 ================= LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities Current portion of long-term debt $ 25,345,000 Current portion of capitalized lease obligations 124,443,000 Accounts payable and accrued expenses 456,830,000 Deferred revenues - current 22,172,000 ---------------- Total current liabilities 628,790,000 CAPITALIZED LEASE OBLIGATIONS, LESS CURRENT PORTION 240,328,000 Long-term debt, less current portion 3,637,616,000 Deferred revenues - non current 238,688,000 Other liabilities 25,220,000 Deferred income taxes 7,700,000 ---------------- Total liabilities 4,778,342,000 ---------------- Series C cumulative exchangeable redeemable preferred stock --- Series D senior cumulative convertible redeemable preferred stock 200,000,000 Stockholders' deficit Series F preferred stock 3,000 Series G preferred stock 9,000 Series H preferred stock 3,000 Series A preferred stock 47,000 Series E preferred stock 1,000 Common stock, par value $.01; authorized 400,000 shares, issued and outstanding 93,160,000 932,000 Additional paid-in-capital 2,280,868,000 Accumulated deficit (2,327,685,000) Accumulated comprehensive loss (10,345,000) ----------------- Total stockholders' deficit (56,167,000) ----------------- Total liabilities, redeemable preferred stock and stockholders' deficit $ 4,922,175,000 ================= ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING ----------------------------------------------------------------- Winstar Files Voluntary Chapter 11 Petition NEW YORK, New York -- April 18, 2001 -- Winstar Communications Inc. (NASDAQ: WCII) today announced that the Company, along with certain of its subsidiaries, has voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the District of Delaware. The Company intends to utilize the Chapter 11 process to restructure its balance sheet, while continuing to provide service to its 30,000 business customers and maximizing the value of its extensive broadband network and comprehensive set of broadband services. The Company emphasized that this Chapter 11 filing will not impact day-to-day operations with regard to its employees, customers and general business operations. The Company has arranged for debtor-in-possession (DIP) financing with an initial commitment of $75 million, from a consortium of banks comprised of CIBC, Citicorp, Credit Suisse First Boston, The Bank of New York and The Chase Manhattan Bank. This commitment may be increased to as much as $300 million upon the satisfaction of certain conditions. William J. Rouhana, Jr., chairman and chief executive officer of Winstar said, "We expect to emerge from the Chapter 11 process with a new balance sheet that has significantly less debt, thereby dramatically lowering our interest payments and providing us with more operating flexibility. Winstar has the most widely available end-to-end broadband network for businesses. The Company has more than 30,000 business customers - employing more than 1 million people - that produced an annual revenue stream of more than $700 million in year 2000. During the restructuring process, we will focus on maximizing the untapped potential of the 140,000 addressable businesses in the 4,800 buildings that are directly connected to our already existing, domestic built-out broadband network." Rouhana concluded, "While this was a very difficult decision to make, given the current circumstances, we determined that we needed to take decisive action for our employees, customers and creditors, to maximize the value of our business." Nathan Kantor, president and chief operating officer of Winstar added, "We have been building our broadband network for more than seven years, making us one of the most experienced and established companies in our sector. We are confident that focusing on the potential of our existing network, coupled with a more efficient organization, will allow Winstar to emerge from this process as a stronger company." ----------------------------------------------------------------- [00004] WINSTAR DEBTORS' CHAPTER 11 DATABASE ----------------------------------------------------------------- LEAD DEBTOR: Winstar Communications, Inc. 685 Third Avenue New York, NY 10017 DEBTOR-AFFILIATES FILING SEPARATE CHAPTER 11 PETITIONS: WCI Capital Corp. Winstar Equipment Corp. Winstar Equipment II Corp. Winstar Credit Corp. Winstar Wireless Fiber Corp. Winstar LMDS, LLC Winstar New Media Company, Inc. At Your Office Inc. SportsFan Radio Network, Inc. Winstar Interactive Ventures I Inc. Winstar Interactive Media Sales Inc. Office.Com Inc. Winstar Wireless, Inc. Winstar Broadband Acquisition 2000, LLC Winstar Midcom Acquisition Corp. Winstar Network Expansion, LLC WWI License, Holding, Inc. Winstar Government Solutions, LLC WVF-CSCI, LLC WVF-DL 1, LLC WVF-CPQ1, LLC WVF-1, LLC WCF-LU2, LLC Winstar Wireless of Delaware, LLC Winstar Wireless of Georgia, LLC Winstar Wireless of Indiana, LLC Winstar Wireless of New Jersey, LLC Winstar Wireless of New York, LLC Winstar Wireless of Pennsylvania, LLC Winstar Wireless of Virginia, LLC Winstar Wireless of West Virginia, LLC Winstar International Inc. CHAPTER 11 PETITION DATE: April 18, 2001 COURT: United States Bankruptcy Court District of Delaware 824 Market Street, 6th Floor Wilmington, DE 19801 CASE NUMBERS: 01-01430 through 01-01462, inclusive OFFICER SIGNING DEBTOR'S PETITION: William J. Rouhana, Jr. Chairman and Chief Executive Officer LEAD COUNSEL: Shearman & Sterling 599 Lexington Avenue New York, NY 10022 Telephone (212) 848-4000 Fax (212) 848-7179 LOCAL COUNSEL: Pauline K. Morgan, Esq. Young, Conaway, Stargatt & Taylor LLP Rodney Square North P.O. Box 391 Wilmington, DE 19899-0391 (302) 571-6600 DEBTORS' FINANCIAL ADVISOR: The Blackstone Group, L.P. DEBTORS' ACCOUNTANTS: PricewaterhouseCoopers LLP DEBTORS' AUDITORS: Grant Thornton DIP LENDERS' AGENT: Citicorp USA, Inc., arranging $300 million of post-petition financing ----------------------------------------------------------------- [00005] LIST OF WINSTAR'S 20 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature of Claim Claim Amount ------ --------------- ------------ United States Trust Company Bonds $930,210,000 of New York, as trustee for holders of 14.75% Senior Discount Notes due 2010 Contact: Peggy Ciesmelewski Corporate Trust Officer 114 W. 47th Street 25th Floor New York, NY 10036-1532 Tel: (212)852-1674 Fax (212)852-1626 United States Trust Company Bonds $639,034,000 of New York, as trustee for holders of 12.75% Senior Notes due 2010 Contact: Peggy Ciesmelewski Corporate Trust Officer 14 W. 47th Street 25th Floor New York, NY 10036-1532 Tel: (212)852-1674 Fax (212)852-1626 United States Trust Company Bonds $325,000,000 of New York, as trustee for holders of 12.50% Senior Notes due 2008 Contact: Peggy Ciesmelewski Corporate Trust Officer 114 W. 47th Street 25th Floor New York, NY 10036-1532 Tel: (212)852-1674 Fax (212)852-1626 United States Trust Company Bonds $200,000,000 of New York, as trustee for holders of 12.75% Senior Euro Notes due 2010 Contact: Peggy Ciesmelewski Corporate Trust Officer 114 W. 47th Street 25th Floor New York, NY 10036-1532 Tel: (212)852-1674 Fax (212)852-1626 Digital Microwave Corp. Trade $20,000,000 Contact: Kevin McCarthy 170 Rose Orchard Way San Jose, CA 95134 Tel: (410) 729-3439 Fax: (410) 729-3460 WorldCom Trade $18,000,000 130 E. Randolph Street Chicago, IL 60601 Tel: (312) 946-0060 Metromedia Fiber Network Trade $10,200,000 Services Contact: Diana Sicolese 360 Hamilton Avenue White Plains, NY 10601 Tel: (914)421-6700 Fax: (914)421-6777 Advance Fiber Communications Trade $10,000,000 Contact: Isabel Munoz 1465 McDowell Street Petaluma, CA 94954 Tel: (800)690-2324 Fax: (707)791-7871 United States Trust Company Bonds $8,733,000 of New York, as trustee for holders of 14.0% Senior Discount Notes due 2005 Contact: Peggy Ciesmelewski Corporate Trust Officer 114 W. 47th Street 25th Floor New York, NY 10036-1532 Tel: (212)852-1674 Fax (212)852-1626 Siemens Information & Comm Trade $8,413,000 Networks, Inc. Contact: Neil Holcomb DEPT CH 10246 Palatine, IL 60055 Tel: (703)627-9709 Fax: (703)262-3032 Hugh O'Kane Electric Co., LLC Trade $7,500,000 Contact: Mike Nappi 88 White Street New York, NY 10013 Tel: (212)431-6007 Fax: (212)966-9361 Williams Communications Inc. Trade $7,400,000 One Williams Center, Suite 26-5 Tulsa, OK 74172 Tel: (918)573-2000 Fax: (918) 573-6578 United States Trust Company Bonds $7,216,000 of New York, as trustee for holders of 10.0% Senior Discount Notes due 2008 Contact: Peggy Ciesmelewski Corporate Trust Officer 114 W. 47th Street 25th Floor New York, NY 10036-1532 Tel: (212)852-1674 Fax (212)852-1626 Ceragon Trade $7,000,000 Contact: Scott Sweetland 777 Corporate Drive Mahwah, NJ 07430 Tel: (603)886-8503 Fax: (603)886-8523 SBC Communications, Inc. Trade $5,200,000 175 E. Houston San Antonia, TX 78205 Tel: (210)821-4105 Fax: (210)351-2071 P-Com, Inc. Trade $5,000,000 Contact Sunny Taylor 3175 South Winchester Blvd. Campbell, CA 95008 Tel: (703)736-2030 Fax: (703)736-2001 Verizon Communications, Inc. Trade $4,200,000 Contact: Marian M. Howell 2980 Fairview Park Falls Church, VA 22042 Tel: (703)645-1233 Level 8 Trade $3,753,000 8000 Regency Parkway Cary, NC 27511 Tel: (919)380-5000 Fax: (919)469-1910 Oracle Corporation Trade $3,000,000 Contact: Daniel Solario 1910 Oracle Way Reston, VA 20190 Tel: (703) 364-2832 Fax; (703) 318-6344 Compaq Trade $2,000,000 Contact: Tammy Sachs 5012 West 79th Street Indianapolis, IN 46278 Tel: (800) 535-2563 Fax: (317)228-3525 ----------------------------------------------------------------- [00006] WINSTAR FILES $10 BILLION SUIT AGAINST LUCENT ----------------------------------------------------------------- NEW YORK, New York -- April 18, 2001 -- Winstar Communications Inc. (NASDAQ: WCII) today announced that it has filed a lawsuit against Lucent Technologies in the U.S. Bankruptcy Court for the District of Delaware. The lawsuit seeks $10 billion in damages for Lucent's breach of its obligations under its strategic partnership agreement with Winstar. In addition, Winstar is seeking immediate injunctive relief requiring Lucent to specifically perform its contractual obligations, including the payment of more than $90 million, which Lucent failed to pay to Winstar on March 30, 2001, in breach of its agreement. Winstar's legal filing today alleges that "Lucent represented that it had the expertise, personnel and financial wherewithal to undertake its obligations under the Supply Agreement . . . Little more than two years into the five-year agreement, Lucent has shown its promises were hollow." The complaint and supporting materials further allege that Lucent has been under close scrutiny by analysts regarding its vendor financing. Lucent has publicly confirmed that in order to conserve cash, Lucent is actively managing its vendor-financing portfolio. As Lucent has publicly stated: "We actively manage our vendor-financing portfolio to minimize the impact on Lucent's cash requirements." Lucent breached its agreement with Winstar and injured Winstar's ability to complete its broadband network. Lucent's breach of its contract with Winstar has forced the Company to seek protection under the U.S. Bankruptcy Code. Winstar emphasized that this lawsuit was filed to recover the damages to its business for its shareholders and bondholders. The Company stressed that its ability to emerge from the Chapter 11 process as a successful operating entity is not contingent on the receipt of any damage award in this lawsuit. ----------------------------------------------------------------- [00007] WINSTAR ISSUES VENDOR AND CUSTOMER Q&A SHEETS ----------------------------------------------------------------- VENDOR Q&A SHEET ---------------- Q1: Will suppliers and vendors to Winstar be paid for products and services already provided ("Pre-Petition claims")? The treatment of any "pre-petition" outstanding invoices -- those that were for materials or services rendered before the date of the Chapter 11 filing - will ultimately be determined by the Plan of Reorganization that will be filed for approval by the Court. Q2: Whom do I talk to about the status of my pre-petition claim? You will receive a form stating the amount of your pre- petition claim and giving instructions on the steps you need to take. Q3: Is there another way for me to receive payment now for pre- petition receivables due me? Winstar is not permitted to make any special payment arrangements or side agreements with vendors regarding the payment of pre-petition debts -- it is against the law. Payments for pre-petition goods and services will be worked out during the Chapter 11 case. The Court must approve any payment for these goods. Q4: Will I be paid for services performed and/or goods delivered after the filing ("Post-Petition Claims")? Yes. Chapter 11 allows the Company to pay for goods and services provided on a post-petition basis. Also, our existing banks have supported us with an initial commitment of $75 million in new financing, which we expect to be increased to as much as $300 million upon the satisfaction of certain conditions. This new financing will be used to continue normal business activities and to pay employees and suppliers. Q5: Is there an order of preference for payment? Bankruptcy law determines order of preference. The ultimate amount and order of payment will be determined by our reorganization plan that must be approved by our creditors and the Court. Q6: What if I want to be paid in advance before providing any goods or services? Payments for post-petition goods and services will be made according to the standard terms for your account. For additional questions, contact vendorinfo@winstar.com CUSTOMER Q&A SHEET ------------------ Q1: Will the filing affect service? Is my service going to be disconnected? Absolutely not. Our ability to provide our customers with high quality voice, data and enhanced broadband services is not affected by the Chapter 11 process. As always, our customer satisfaction remains second to none. Our existing banks have supported us with an initial commitment of $75 million in new financing, which we expect to be increased to as much as $300 million upon the satisfaction of certain conditions. This financing will enable us to fund our business activities, pay employees and suppliers, and ensure that we can continue to meet your needs as we complete the restructuring process. Q2: Will Winstar still offer the same products and services ? Yes, Winstar will continue to provide a comprehensive set of broadband services that will help our customers better execute their business strategies. Q3: How can Winstar continue to serve its customer base with 2000 less people? While a reduction in workforce is difficult for any organization, Winstar is fortunate to have achieved a critical mass in our network and maturity within our internal systems. As a result, there will be absolutely no impact on our ability to satisfy our customers. Most of the reductions came from the Company's "network construction" side -- not from the operations side. Q4: What will happen to the orders I submitted for service? Nothing will change. Orders will be honored and Winstar will meet its contractual obligations. Normal operations will continue as before. We value our customers and are excited to continue to provide our high quality satisfaction to you. Q5: Will the filing affect prices? Chapter 11 will not affect prices. We will continue to evaluate and set prices according to the external market. We have always offered outstanding value to our customers and we will continue to do so. Q6: Whom do I call about problems with my service? If you experience any problems with your Winstar service, you should continue to use the same contact number: Customer Care and Technical Support: 1-888-961-8800. *** End of Issue No. 1 *** ------------------------------------------------------------------------- Peter A. Chapman peter@bankrupt.com http://bankrupt.com ------------------------------------------------------------------------- Recommended Reading: "George Eastman: Founder of Kodak and the Photography Business." Order your copy of this title today at http://www.amazon.com/exec/obidos/ASIN/1893122999/internetbankrupt -------------------------------------------------------------------------