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NorthPoint Communications Group Inc., the bankrupt and delisted seller of high-speed Internet access, expects to receive between $200 million and $400 million for its assets when the company is sold in a bankruptcy auction next month, said sources close to the sale. San Francisco-based NorthPoint plans to hold the auction beginning March 5, a company official said Thursday. NorthPoint has hired the investment banking firm Houlihan Lokey Howard & Zukin to manage the auction, and the law firm Latham & Watkins to advise it on restructuring. According to NorthPoint spokesman Marvin Wamble, the bidding is expected to last about three weeks. Although the company hopes to find a single buyer for its assets, it is also preparing for a piecemeal turnover. Ultimately, the U.S. Bankruptcy Court for the Northern District of California, based in San Francisco, will decide on the sale of NorthPoint’s assets. NorthPoint filed for Chapter 11 protection on Jan. 16, less than two months after Verizon Communications canceled an $800 million deal to acquire the wholesaler of digital subscriber lines, or DSL. NorthPoint, charging Verizon with breach of contract, filed a $1 billion lawsuit against Verizon on Dec. 6. On Feb. 15, the bankruptcy court ruled NorthPoint’s lawsuit could proceed. But the court rejected Verizon’s request for relief from the automatic stay so that it could pursue a separate action in Delaware seeking court approval for its termination of the deal. Verizon spokesman Peter Thonis said that the New York-based telecom is considering whether to appeal the decision, and remains confident NorthPoint’s lawsuit will be rebuffed. As it prepares for its auction, NorthPoint officials can expect to receive somewhat less than either GST Communications Inc. or CapRock Communications Corp. when both companies were sold last year. In the case of GST, Time Warner Telecom Inc. paid $690 million or 0.7 times gross plant, property and equipment (PPE) for a company that owned a fiber-optic network concentrated in the Pacific Northwest. As for CapRock, McLeodUSA Inc., paid $500 million or 0.8 gross PPE for a fiber-optic network focused on Texas and the Plains states. The big difference with NorthPoint is that while GST and CapRock owned fiber-optic networks, NorthPoint’s chief assets are equipment it has installed in local switching stations owned by the country’s four regional Bell operating companies, or RBOCs. The equipment, called D-SLAMs, allows DSL wholesalers to provide high-speed access to their customers. At the end of the third quarter, NorthPoint had installed D-SLAMs into 1,652 RBOC switching stations. Because the value of D-SLAMs is much less than that of fiber, one Wall Street analyst estimated that NorthPoint could only expect to receive between 0.3 and 0.5 times gross PPE for its assets. At the end of the third quarter, NorthPoint’s gross PPE was $526.6 million. A source close to the sale said that the value of $200 million to $400 million has been frequently mentioned as the amount Northpoint can expect to reap from the auction. The companies most likely to be interested in NorthPoint’s D-SLAMs are the RBOCs. In the past six months, those companies — SBC Communications Inc., BellSouth Corp., Qwest Communications International Inc., and Verizon — have all rolled out aggressive DSL programs. Another company that may be interested in NorthPoint’s D-SLAMs is XO Communications Inc., the Reston, Va. telecom that has raised roughly $3.1 billion in cash and credits for capital expenditures. XO is building fiber-optic links between cities in the U.S. and Europe, and recently launched its own DSL program. XO could not be reached for comment. Verizon’s November decision to cancel the merger deal came as market valuations for DSL providers were quickly falling. NorthPoint’s primary competitors, Covad Communications Inc. and RhythmsNet Connections Inc., have also suffered a severe loss in market value over the past nine months. Copyright (c)2001 TDD, LLC. All rights reserved.

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