There was barely a rumble in the market after Winstar Communications' announcement that it would default on its bank covenant. The company filed for Chapter 11 bankruptcy last Wednesday. Traders pegged levels at 32-37. "No one's surprised, that deal has been a dog for a while," one said of the announcement. Winstar is a competitive local exchange carrier based in New York City. Calls to the company were not returned.
Once a par credit, Winstar's fall is blamed on an oversaturated market and a business plan that market players say hasn't met expectations. "Until the mid-90s people were so dazzled with all the technology that they weren't really focused on the reality", one trader said. "Thirty percent of the new issue was telecom, but then wireless got away from lending based on an established cash flow and focused on new project finance. What happened was they built it, and they didn't come," a dealer said.
Winstar has a $1.15 billion credit facility that breaks down into three tranches. Bank of New York, CIBC World Markets, Citibank, Credit Suisse First Boston are the lead arrangers, according to Capital DATA Loanware. A spokeswoman at Bank of New York declined comment. Spokesmen at the other banks did not return calls.