By JOHN MacDONALD/Associated Press Writer
HELENA - Touch America Holdings Inc., which suffered a string of financial setbacks and a massive loss in stock value since its conversion from the energy giant Montana Power Co., filed for federal bankruptcy protection in Delaware Thursday.
In a news release late Thursday evening, Chairman and CEO Bob Gannon said the company was seeking Chapter 11 bankruptcy protection ''based on the continuing uncertainty about our liquidity.''
''The board decided that seeking bankruptcy protection was the best option to deal with creditors, customers and employees,'' Gannon said.
The filing comes just one day after Touch America laid off 216 employees - more than half its remaining work force. That left Touch America with just 162 employees.
Thursday's filing was not unexpected. The company has warned for months - and reiterated the warning on Wednesday - that it may have to seek bankruptcy protection this summer because of continuing financial problems.
Linda McGillen, a company spokeswoman, declined to comment at length when reached at home Thursday night, saying the company had ''chosen not to comment beyond our news release because it's now a pending court proceeding.''
In its news release, the company said it had also reached a deal to sell its private line and Internet business for $28 million to 360Networks Inc., a Canadian-based broadband telecom service provider backed by WL Ross & Co.
Proceeds of the sale will be used to pay ''pre- and post-filing obligations,'' the company said.
Touch America also said it had received a debt-financing commitment through WL Ross to ensure that vendors and remaining employees continue to be paid, and has asked the bankruptcy court ensure continued smooth operation of the company during the reorganization ''to assure that the filing has no effect on customers or on the payment of salaries, wages and benefits to the company's employees.''
Touch America's stock hasraded for less than a dollar since last July and was removed from both the New York Stock Exchange and the Over-the-Counter Bulletin Board earlier this spring.
In addition, the company has been ordered to pay Qwest Communications more than $60 million in a dispute over the purchase three years ago of Qwest assets. Touch America has asked federal regulators to reconsider that decision.
The company also is facing a separate move to strip $827 million from the value of its fiber-optic network, and has been sued by stockholders critical of the company's switch from Montana Power to Touch America, and the awarding of hefty bonuses to company executives, including Gannon.
The company's financial turmoil began almost immediately after the March 2000 announcement that the 90-year-old Montana Power was giving up its electricity monopoly in much of the state to focus efforts instead on its then-fledgling Touch America telecommunications offshoot. Montana Power stock was selling for about $65 a share at the time.
The company sold its energy properties for about $1 billion in cash, investing most of it in laying 24,000 miles of fiber-optic cable.
That conversion, however, came just as the telecom industry fell flat and Touch America found itself with lots of assets and even cash on hand, but too few customers to support its massive network.
The company had about $100 million in cash after the purchase of its fiber-optic lines, but that has since dwindled.
The situation worsened for the company last summer when Touch America's stock fell below $1 a share and never recovered. The NYSE delisted the stock in March. Touch America began trading on the Over-the-Counter Bulletin Board, but was delisted from that exchange in May after failing to meet deadlines for filing earnings reports with the Securities and Exchange Commission. It has traded on the ''pink sheets'' since, closing Thursday at 11.5 cents a share.
The Butte-based company has not filed an annual report for 2002, or an update for the first quarter of this year.