Bankruptcy Process

The following is a brief summary of the sequence of events that have occurred in Genuity’s Chapter 11 process, and of events that Genuity expects to occur during the remainder of the Chapter 11 process.  A specific timeline for many of the remaining activities is not provided because of the complexity and unique nature of Genuity’s bankruptcy case.

1. Genuity and certain of its subsidiaries (including its principal operating subsidiaries, Genuity Solutions Inc., Genuity Telecom Inc. and Genuity International Inc.) filed a reorganization case under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York on November 27, 2002, immediately putting into effect an automatic stay, which prohibits, among other things, all actions against these companies to collect pre-petition claims.
2. In conjunction with the filing of the bankruptcy case, Genuity and certain of its subsidiaries signed an agreement to sell substantially all of their assets to Level 3 Communications.  At an initial hearing on December 3, 2002, the bankruptcy court authorized Genuity to pay pre-petition and post-petition employee wages and benefits, honor pre-petition obligations to customers and continue customer programs, continue maintenance of existing bank accounts and existing cash management systems, and other activities.
3. Genuity filed a motion seeking court approval of sale of assets to Level Communications.  That sale motion also established bidding procedures and a timeframe during which other qualified potential buyers could submit higher and better offers for Genuity’s business.  No additional qualified bids were received during the bidding process.  As a result, Genuity and Level 3 Communications moved forward to complete the acquisition process.  The sale occurred on January 23-24, 2003.  At the conclusion of the hearing that occurred on January 23-24, 2003, the Bankruptcy Court authorized the sale of substantially all of the assets and operations of Genuity and certain of its subsidiaries to Level 3 Communications, free and clear of all pre-existing liens, claims and encumbrances.  The sale to Level 3 Communications closed on February 4, 2003.
4. With the sale to Level 3 completed, Genuity is now working to collect outstanding accounts receivable, to sell any remaining valuable assets, and to wind-down its remaining business including its foreign operations.  Genuity has commenced a claims resolution process that will ultimately determine what creditor claims exist that should receive distributions.  Genuity has filed schedules and statements with the Bankruptcy Court, stating what it believes it owes its various creditors.  Genuity anticipates that a bar date of mid-April 2003 will be established, and that creditors must file claims by that time if they disagree with Genuity’s characterization of a claim.  After claims are filed by creditors, Genuity may object to claims, essentially disputing whether a particular creditor is owed any money at all or disputing the amount owed.
5. In addition, Genuity is working with its legal advisors to formulate and file a Chapter 11 plan with the court.  That plan will provide for the liquidation of Genuity and its subsidiaries.  Genuity will likely negotiate with certain of its major creditors regarding the formulation of the plan.
6. When the plan is filed, Genuity will also file a disclosure statement that describes the plan and the proposed treatment of creditors.  The court will then schedule a hearing to consider the adequacy of the disclosure statement.  If the disclosure statement (perhaps with amendments requested by creditors or the court) is approved, the bankruptcy court will establish a schedule for parties-in-interest to vote on the plan (if the bankruptcy code permits them to vote), a deadline for parties-in-interest to raise objections, if any, and a date for a hearing to consider approving the plan.  Genuity will then send the disclosure statement and plan to all creditors, along with ballots allowing creditors entitled to vote to cast their votes in favor or against the plan.  Genuity will also send notice of the hearing on the plan to all equityholders.
7. At the hearing on the plan – the “confirmation hearing” – creditor objections will be heard and Genuity will explain to the court why it believes the liquidation plan that it proposes should be approved.  If the court approves Genuity’s liquidation plan, then Genuity would proceed, over a period of weeks, to consummate that plan.  Certain creditor claims might be paid at that time, with further distributions over a period of time as claims are settled and various assets (such as unpaid accounts receivable) are collected and reduced to cash.