AT&T Corp. expects to close an agreement Friday to buy a portion of the assets of bankrupt long-haul carrier Velocita Corp. for $37 million in cash and stock, a source said.
AT&T will buy conduit and fiber assets for $2 million in cash and $35 million in stock, the source added, but said he didn’t know if AT&T would be acquiring lit capacity also. Velocita, a bankrupt Falls Church, Va.-based construction company and wholesale carrier, had won contracts over the last few years to build part of a fiber-optic network for AT&T.
The U.S. Bankruptcy Court for the District of New Jersey approved AT&T’s bid for Velocita’s fiber-optic network and other assets late Wednesday, according to the Daily Deal. Weil, Gotshal & Manges LLP, the law firm where the auction reportedly took place, did not return a phone call Thursday.
In October 1999 Velocita, then known as PF.Net, signed a deal to build part of a fiber-optic network for AT&T while it secured rights to build its own high-speed network. Two years later Velocita won a contract to develop additional route miles of AT&T’s network.
But Velocita had lit 2,400 miles as of March 31 this year–a fraction of the 14,000-route mile network it planned to build.
Despite initially raising $1.5 billion through investors like Odyssey Investment Partners and oil and natural gas pipeline company Koch Industries, Velocita ran out of money. In May, Velocita disclosed it would not make an interest payment on its senior notes, due in 2010, after receiving three separate extensions on waivers of financial covenants. It then filed for bankruptcy court protection.
Koch Industries and Odyssey Investment Partners did not return phone calls Thursday seeking comment, and no one could be reached at Velocita’s main number.