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Legal Tips For Dealing With Bankrupt Telecom Carriers.

Article Excerpt
By Gregory Staple and Steven Abramowitz

Originally published in April 2002

When Global Crossing (GC), the world's largest supplier of fiber optic transmission capacity, filed for bankruptcy in January 2002, hundreds of customers and interconnecting carriers found themselves scrambling to review their legal rights.

Can GC suspend or terminate service on circuits covered by IRUs (Indefeasible Rights of Use)? Does a bankruptcy filing block an IRU holder's right to sell or swap capacity? And what about servicing a bankrupt carrier -- how can a vendor ensure payment? Also, can an existing supplier -- say, an interconnecting carrier -- set off monies due a bankrupt carrier against past or future fees that it is owed?

The participation of Vinson & Elkins in several recent telecom industry bankruptcy proceedings has helped to clarify the answers to these and related questions that typically arise. Our experience also yields a number of lessons for parties seeking to acquire core assets --transmission facilities, telehouses, customer contracts -- from the estate of a bankrupt carrier. Over forty bids for GC's assets have already been received, but final offers are not due until mid-June.

The future of IRUs

Let's look first at the status of IRUs sold by a carrier that petitions to reorganize its business under Chapter 11 of the Bankruptcy...

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