Dec. 9, 2003 -- The Chapter 11 filing by Cable & Wireless America (CWA) includes a motion to reject 43 of the company's 100 property leases in the US, as well as eight subleases.
The leases submitted for rejection are ones which Cable & Wireless has already vacated, the company said in its filing. The rejections will save the company $2.9 million a month - more than $98,000 a day.
The motion is also seeking court permission to abandon furniture and telecom equipment valued at $651,600 in 20 of the leased premises, saying the expense of removing the equipment would exceed its likely resale value.
Thirteen of CWA's top 20 unsecured creditors are landlords, according to the bankruptcy documents. That includes the largest unsecured creditor, L&B Tysons Commerce Center, which is owed $590,559 in pre-petition obligations.
CWA, the US operating unit of Cable & Wireless plc, filed for Chapter 11 protection Monday as part of a prepackaged deal in which an affiliate of Gores Technology Group will purchase the American business unit for $125 million. The purchase by Gores, a California-based investment firm, allows C&W to exit its unprofitable US hosting business, which includes assets bought from Exodus Communications and Digital Island.
The bankruptcy filing does not include details on the fate of Cable & Wireless' 15 active data centers, which house more than 1,000 hosting and managed services clients. Neither C&W nor Gores have said how many of the data centers will be included in the sale.
The proposed rejections include Cable & Wireless' former US headquarters offices at 8219 Leesburg Pike in Vienna, Va., which was vacated approximately five months ago, as well as a sales office at 909 Third Avenue in New York. Also on the rejection list are surplus sites at carrier hotels in major cities, including 56 Marietta Street (Atlanta), 25 Broadway (New York), 470 Vanderbilt (Brooklyn), 900 Walnut Street (St. Louis) and 1205 Poydras (New Orleans).
CWA's real estate restructuring is being handled by Keen Consultants LLC, a Long Island firm that specializes in renegotiating and teminating real estate leases. Keen has evaluated, negotiated and disposed of more than 200 million square feet of real estate and leases and completed more than $1.3 billion in transactions. Its recent clients include Arthur Anderson LLC, Tommy Hilfiger and Fruit of the Loom.
Companies filing for bankruptcy have the option of rejecting real estate leases and many other types of agreements - such as fiber optic contracts, colocation agreements and hosting agreements - as part of their reorganization. The debtor has 60 days to decide to reject a lease, but in complex cases that deadline can be extended indefinitely as the company reorganizes.
When a lease is rejected, landlords can often recover some money from security deposits, which are common in telecom leases. Landlord recovery from a deposit is usually capped by the court at either one year's rent or 15 percent of total value of the lease, depending on the specifics of the lease.