Williams Communications Group Inc. (www.williamscommunications.com ) announced Friday the carrier’s carrier is on target to emerge from bankruptcy by Oct. 15, after reaching an agreement to secure a $150 million investment through New York-based diversified holding company, Leucadia National Corp.

Williams Communications, based in Tulsa, Okla., would eradicate approximately $6.5 billion in claims and emerge from bankruptcy with around $525 million in debt, far less than its rival Level 3 Communications Inc. (www.level3.com ).

Williams Communications, which listed $7.15 billion in debt in its April bankruptcy petition filing, also disclosed that an official unsecured creditor’s committee has reached a settlement agreement with the company, The Williams Companies and Leucadia National Corp.

Under an amended reorganization plan, which will be filed soon with the U.S. Bankruptcy Court for the Southern District of New York, unsecured creditors owed approximately $2.5 billion would hold a 55 percent equity stake in Williams Communications. Leucadia National Corp., a holding company involved in banking and lending among other industries, would hold a 45 percent equity stake.

Current shareholders would be nearly wiped out, although the plan calls for a method that would distribute up to 2 percent of equity to securities holders. In March 2000, at the height of the telecom boom, Williams Communications traded as high as $59 on the New York Stock Exchange (www.nyse.com ). Following the demise of Internet startups and a softening broadband market, carriers failed to service their lofty debt payments. Williams Communications was among them. Shares of Williams Communications were trading over the counter at 27 cents Monday afternoon on the OTC Bulletin Board.

The Leucadia agreement appears to represent a blow to Level 3. In hopes to buy its rival, Level 3 ( www.level3.com ) submitted a $1.1 billion bid this month to acquire Williams Communications. Flush with cash after raising $500 million in notes through investors, including Warren Buffett’s Berkshire Hathaway ( www.berkshirehathaway.com ), Level 3 is hunting for distressed assets.

Level 3’s stock price has doubled since the beginning of the month, but the Broomfield, Colo.-based carrier is still saddled with $6.5 billion in debt. Still, Level 3 does not have the stigma of having filed for bankruptcy protection, a move that can alienate customers.

Since filing for bankruptcy protection in April, Williams Communications has "not lost any key customers," said spokeswoman Patty McKissick.

The agreement announced Friday also calls for Leucadia to fork over $180 million to settle the claims of the Williams Companies against Williams Communications. Williams (www.williams.com), the former energy parent of Williams Communications, helped the telecom operator build a 33,000-mile fiber-optic network. Williams Communications also will buy back its headquarters and other assets from the Williams Companies for $150 million.

"This is essentially severing the relationship between the companies," McKissick said.

Williams Communications also disclosed plans Friday to change its name to WilTel within two years. WilTel, the predecessor of Williams Communications, tapped decommissioned pipelines in the 1980s to operate fiber-optic cables. In 1995 WilTel was sold to LDDS, which then became WorldCom Inc. (www.worldcom.com) But the Williams Companies bought back the rights to the name.