Cash-strapped telecommunications services provider Winstar Communications filed for bankruptcy protection on Wednesday, blaming Lucent Technologies for violating a vendor financing agreement and forcing the filing. The Nasdaq on Wednesday halted trading in Winstar shares, which closed Tuesday at 14 cents, down nearly 99 percent this year, pending additional information. Winstar's debt was recently quoted at two cents on the dollar. Earlier this month, Winstar fired 2,000, or 43 percent, of its 4,700 workers, and said it would halt network expansion for the year to save money. In a Chapter 11 proceeding, secured creditors usually fare best, followed by unsecured creditors.
Shareholders often end up with nothing.
On Monday, Lucent declared Winstar in default of that agreement. A Lucent spokeswoman, Mary Lou Ambrus, rejected Winstar's claim that Lucent is at fault. We did not breach any of our obligations to Winstar. The truth is it is in breach of its financial covenants and in payment default with us. We have been monitoring the situation and are appropriately reserved.