SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported): October 18, 2001
Global TeleSystems, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 0-23717 94-3068423
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
4121 Wilson Boulevard
8th Floor
Arlington, VA 22203
(Address of principal executive offices, including zip code)
(703) 236-3100
(Registrant's telephone number, including area code)
Item 1. Changes in Control of Registrant
Pursuant to the terms of the Stock Purchase Agreement (the "Stock
Purchase Agreement"), dated as of October 18, 2001, among Global TeleSystems,
Inc. ("GTS"), GTS European Telecommunications Corp. ("G-Tech"), Global
TeleSystems Europe B.V. ("GTS Europe") and KPNQwest N.V. ("KPNQwest"), KPNQwest
agreed to acquire (i) Global Telesytems Europe B.V. ("GTS Europe"), which owns
and operates Ebone, Europe's leading broadband optical and IP network service
provider and (ii) GTS's Central European operating companies, which are the
leading alternative provider of voice and data communications in Central Europe.
KPNQwest will acquire these companies through the issuance of approximately
Euro 210 million of new senior convertible bonds and the assumption of bank
debt and capital lease obligations upon closing.
To ensure the binding nature of the Stock Purchase Agreement on all
bondholders, GTS expects that the transaction will be effectuated through
"pre-arranged" court proceedings by GTS and GTS Europe under United States
bankruptcy laws, and a corresponding application by GTS Europe for "surseance"
and "deposition for composition" in the Netherlands. Approval of the U.S. plan
is subject to, among other things, acceptance by more than one-half in number
and two-thirds in dollar amount of voting bondholders in the requisite classes.
Approval of the Dutch plan is subject to, among other things, approval by
two-thirds in number and three-quarters in value of the GTS Europe bondholders
participating in the proceedings. None of the operating subsidiaries of GTS will
be involved in either court proceeding and both the Dutch and US plans will call
for all vendor claims of GTS's operating subsidiaries to be paid in the normal
course. The transaction also may require approval by the European Commission,
and is expected to close during the first quarter of 2002.
To fund GTS' operations prior to closing, GTS has reached an interim
financing agreement with Deutsche Bank, Dresdner Bank and Bank of America (the
"Bank Group"), and investment funds and accounts managed by Oaktree Capital
Management LLC ("Oaktree"), an affiliate of one of its bondholders. Under this
agreement, the Bank Group and a group of bondholders underwritten by Oaktree
(the "Oaktree Group") will provide up to Euro 100 million of secured financing
beyond that provided under GTS's existing Euro 150 million bank facility.
In addition, GTS caused certain of its affiliates to enter into a
Share and Asset Purchase Agreement, dated as of October 18, 2001 (the "Share and
Asset Purchase Agreement"), with KPNQwest and certain of its affiliates, calling
for the sale of all of the outstanding shares of GTS Transatlantic Carrier
Services, Ltd. ("GTS Transatlantic"), the owner of GTS' rights in a
transatlantic cable system known as FLAG-Atlantic-1 (the "System"), together
with the equipment used by certain affiliates of GTS to operate and maintain the
System. The aggregate purchase price for these purchases was Euro 50 million
(the "Purchase Price"), payable in installments of Euro 5 million, Euro 10
million, Euro 15 million and Euro 20 million on October 19, 2001, November 15,
2001, December 15, 2001 and February 28, 2002, respectively. Additionally,
pursuant to the Share and Asset Purchase Agreement, GTS Network (Ireland)
Limited, an affiliate of GTS, will provide at cost network management services
for KPNQwest and its affiliates in respect of the equipment purchased under the
Share and Asset Purchase Agreement.
Pursuant to the agreement between GTS and its bondholders, of the
approximately Euro 120 million of new senior convertible notes to be issued by
KPNQwest, the following allocations will apply: approximately Euro 40-55
million principal amount will be distributed to bondholders participating in the
interim financing agreement based upon the peak interim borrowings;
approximately Euro 5.3 million principal amount will be allocated to the GTS
Convertible Debentures (along with part of the allocation outlined below will
result in a total allocation to the GTS Convertible Debentures of Euro 10.0
million principal amount); the remaining net amount of the new senior
convertible bonds will be allocated 76 percent to the GTS Europe bondholders and
the remaining 24 percent (less approximately Euro 4.7 million principal amount
required to increase the allocation to the GTS Convertible Debentures to
Euro 10.0 million principal amount) will be allocated to the holders of the GTS
Senior Notes. In addition, the holders of the GTS Senior Notes will receive
GTS's retained investments in Ventelo, Ltd., GTS' reorganized Business Services
voice operations unit that was divested by GTS earlier this year.
Also on October 19, 2001, GTS issued a press release relating to the
business combination with KPNQwest. A copy of the press release is attached
hereto as Exhibit 1 and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits
(c) Exhibits
99.1 Press release issued by Global TeleSystems, Inc. on
October 19, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Global TeleSystems, Inc. has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
GLOBAL TELESYSTEMS, INC.
Date: October 22, 2001 By:/s/ Stephen Baus
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Name: Stephen Baus
Title: Senior Vice President
EXHIBIT INDEX
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Exhibit
No. Description
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99.1 Press release issued by Global TeleSystems, Inc. on October 19, 2001.