Williams could pick up some needed cash and finally end its costly affiliation with its former telecommunications unit by selling its shares to an unknown, deep-pocketed investor, according to news reports. Williams Communications Group Inc., which siphoned off its parent’s cash before spinning off, and then never turned a profit, filed for bankruptcy protection earlier this year (see Daily GPI, April 24).

In a Tuesday company-wide broadcast, Williams Cos. CEO Steve Malcolm did not comment on the possible sale of its telecom shares, but he did tell employees that the company would be narrowing its focus on businesses that are the most profitable to improve its balance sheet and win back investors’ confidence. Speaking to employees via the Internet and satellite television, Malcolm outlined a plan to restore credibility.

At the heart of the plan, said Malcolm, will be a focus on its Rocky Mountain exploration and production activities, interstate gas pipeline operations, energy marketing and trading, its master limited partnership and the operation of gas gathering lines and processing plants.

“Within each of these businesses, we’ll sharpen our focus,” Malcolm said. “We will be in businesses where we can be a top performer and have the opportunity to grow.” He said, “it’s our job to win back, earn back and work our way back to regain every cent of value and restore our good name.” He said Williams would act with integrity, would operate efficiently and would make the needed changes to be successful.

Although there was speculation about the possible unnamed buyer for the bankrupt telecom company — including the names of several communications corporations and even Williams investor Berkshire Hathaway — the company declined to comment. There also was no comment from any possible buyers. MidAmerican Energy Holdings Co., a subsidiary of Berkshire Hathaway, purchased Williams’ Kern River Gas Transmission and 1.47 million shares of convertible preferred stock (each convertible to 10 common shares) in March (see Daily GPI, March 8).

The Wall Street Journal reported Wednesday that under a nearly completed reorganization plan, an unnamed investor apparently will purchase 45% of the telecommunications unit by contributing $150 million to reduce its bank debt and buying out the former parent’s $1.3 billion claim for an undisclosed amount. The plan apparently would give Williams Communications bondholders a 55% stake in the company. They are owed about $2.5 billion.

The agreement would require the bondholders and Williams Communications to not pursue any legal claims against Williams Cos. for the way the spin-off was handled, removing a significant liability from the parent company, according to the Journal. Williams Communications also would buy its Tulsa headquarters building from Williams Cos., which carries a receivable of $154 million for the Williams Communications headquarters. Although creditors agree on the outline of the plan, details have to be finalized before a reorganization plan is filed as early as this week in U.S. Bankruptcy Court for the Southern District of New York.

When the formerly touted broadband carrier filed for bankruptcy, its high-speed communications network connected 125 cities. A few weeks before Williams Communications filed for bankruptcy, Williams Cos. announced an agreement to make semi-annual interest payments on $1.4 billion of the company’s debt and to place the debt on its balance sheet this year. The deal removed the conditions under which Williams could have been obligated to come up with the entire $1.4 billion. In the first quarter, Williams took a $232 million charge due to a write-down of its investment in the communications company (see Daily GPI, April 26).

Williams Communications, formed in 1998, was spun off from its parent in April 2001 in the form of a dividend, in which Williams Cos. distributed nearly 400 million shares, about 95% of Williams Communications common stock, to holders of the parent firm’s common stock. When the spin-off was announced, the company’s then CEO Howard Janzen said, “The spinoff gives Williams Communications the best opportunity to strengthen its industry leadership and the ability to attract investors who value the vast potential of broadband.”

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