Exhibit 99.1
[GRAPHIC OMITTED]
FOR IMMEDIATE RELEASE
Global TeleSystems Agrees to Combination with KPNQwest
o Combination creates Europe's most powerful data networking and hosting
company
o Agreement constitutes final part of GTS's comprehensive financial
restructuring plan
LONDON / AMSTERDAM - 19 October 2001 - Global TeleSystems, Inc. ("GTS"
or the "Company") (OTC: GTLS; NASDAQ EUROPE: GTSG; Frankfurt: GTS) announced
today that it has signed a definitive share purchase agreement with KPNQwest
("KPNQwest") (NASDAQ: KQIP).
Under the terms of the agreement, KPNQwest will acquire (i) Global
TeleSystems 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.
Robert Amman, Chairman and Chief Executive Officer of GTS, commented:
"GTS and KPNQwest make a formidable combination. We believe that this new
company can lead the data revolution in Europe. The many valuable facets of GTS
- its assets, its customers, and most significantly, its talented people - will
be a great addition to KPNQwest. We expect this new combined company to thrive."
Amman continued: "This transaction represents the completion of the
consensual restructuring process that we began late last year. As the total
consideration from KPNQwest is far less than our outstanding bond liability, we
greatly regret that no value can accrue to our preferred and common
shareholders. Given current market valuations, we nevertheless feel that this
agreement represents a fair value for the operations and assets of GTS and
presents the best opportunity to create as much value as possible for our
bondholders while continuing to deliver on our commitments to customers,
employees, suppliers and partners."
GTS has reached agreements with the informal committees representing
the holders of GTS's and GTS Europe's publicly traded bonds with respect to the
terms of the transaction with KPNQwest, and the allocation of KPNQwest Senior
Convertible Notes. Approximately 67 percent of the
approximately (euro)1.1 billion outstanding principal amount of the
publicly traded Senior Notes at GTS Europe, approximately 78 percent of the
approximately (euro)116 million outstanding principal amount of the Senior Notes
at GTS, and approximately 35 percent of the approximately (euro)362 million
outstanding principal amount of Convertible Debentures issued by GTS have signed
forbearance agreements, committing them to support the proposed transaction
subject to certain terms and conditions.
"The high level of participation and support demonstrated by the GTS
and GTS Europe bondholders in the form of signed forbearance agreements
demonstrates the bondholders' collective support for the proposed transaction
and allocation of value," commented Irwin Gold, Senior Managing Director of
Houlihan Lokey Howard & Zukin, financial advisor to GTS and GTS Europe.
To ensure the binding nature of the sale 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.
Interim Funding
To fund the Company's 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.
Allocation of Consideration
Pursuant to the agreement between the Company and its bondholders, of
the approximately (euro)210 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 the 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, the Company's reorganized Business
Services voice operations unit that was divested by the Company earlier this
year.
2
About GTS (www.gts.com)
GTS is the parent company of Ebone, the leading broadband optical and
IP network service providers in Europe, and GTS Central Europe, one of the
leading providers of voice and data services across the region. Ebone's fibre
optic network extends more than 25,000 kilometres, reaching virtually all major
European cities. Ebone also operates one of Europe's leading IP networks,
serving approximately 25% of all European Internet users. With operations in
North America and in 50 European cities, Ebone delivers tailored networking
services to telecommunication carriers, service providers and large European
enterprises with intensive data requirements. GTS Central Europe has operations
in the Czech Republic, Slovakia, Poland, Hungary and Romania. For further
information, please visit us at www.gts.com or www.ebone.com.
GTS Contacts
GTS Investors
Steve Bond, Investor Relations
Tel: +44(0)-207-769-8242; Fax: +44(0)-207-769-8068;
Email: investor.relations@gts.com
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Houlihan Lokey Howard & Zukin (Investment Banking advisors)
David Hilty or Tanja Aalto
Tel: +1-212-497-4100; Email: dhilty@hlhz.com or taalto@hlhz.com
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GTS Media
Glenn Manoff, Vice President, Corporate Communications
Tel: +44 (0) 207 769 8290 Fax: +44 (0) 207 769 8053 Email: glenn.manoff@gts.com
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Olivia Harris, Press Officer
Tel: +44-(0) 207 769 8295 Fax: +44 (0) 207 769 8053
Email: olivia.harris@gts.com
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This press release contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbours created thereby. Investors are cautioned that all
forward-looking statements involve risks and uncertainties. Although GTS
believes that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be inaccurate,
and therefore, there can be no assurance that the forward-looking statements
included in this press release will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by GTS or any other person that the objectives and plans of GTS
will be achieved.