NorthPoint Lawsuit Against Verizon Gets Backing
By Jeff St.Onge
San Francisco, July 20 (Bloomberg) — NorthPoint Communications Group Inc.’s $1 billion lawsuit against Verizon Communications Inc. over the companies’ failed combination has received $7.5 million in backing from an investment banking firm.
Angelo Gordon & Co., a top NorthPoint bondholder based in New York, agreed Wednesday to provide the money to bankroll the lawsuit, said Lynn Schoenmann, trustee of the Internet service provider that shut down operations in March.
NorthPoint sought Chapter 11 bankruptcy protection in January after Verizon scrapped plans to acquire it for $2.15 billion. San Francisco-based NorthPoint later sued Verizon, claiming the nation’s biggest local phone company violated legal agreements.
@@I think the new funding is quite a sufficient war chest,” said Schoenmann. @@The lawsuit will be pursued very aggressively and I think we have a very strong case.”
The bankruptcy court in San Francisco converted NorthPoint’s case to a Chapter 7 liquidation last month and appointed Schoenmann as trustee to run NorthPoint on behalf of creditors.
Schoenmann said there had been concern NorthPoint wouldn’t have enough cash to fund the litigation. She filed an amended complaint against Verizon with the California Superior Court in San Francisco last week.
The allegations against Verizon @@potentially represent a $4 billion outcome,” Schoenmann said.
A case status conference is scheduled for August 3. NorthPoint hired the San Francisco law firm Folger Levin and Kahn to handle the litigation.
Bob Varettoni, a Verizon spokesman, said the company had no comment on NorthPoint’s new funding. Varettoni repeated Verizon’s position that calling off the acquisition was based solely on the deterioration of NorthPoint’s business.
Verizon backed out of the acquisition in November after NorthPoint reported that third-quarter sales were less than first reported. Verizon has said the purchase agreement gave it the right to cancel its offer if NorthPoint’s business or financial conditions changed significantly.
AT&T Corp., the largest U.S. long-distance phone company, won a judge’s approval in March to buy NorthPoint’s network equipment, software and two of its building leases for about $135 million.
The proceeds of the asset sale were used to pay NorthPoint’s secured lenders, Schoenmann said. The secured creditors are still owed between $40 million and $80 million.
Shares of New York-based Verizon, formed by the merger of Bell Atlantic Corp. and GTE Corp., fell $1.03 to $56.13.