Metromedia Seen Stepping In To Help Metro Fiber
01 Aug 16:11
By Paula L. Stepankowsky
Of DOW JONES NEWSWIRES
LONGVIEW, Wash. (Dow Jones)--Cash-starved Metromedia Fiber Network Inc.
(MFNX) managed to find parties willing to commit $180 million to extend a bank
credit letter to Aug. 15, and some analysts are speculating that majority
shareholder Metromedia Co. could be among them.
Some also say that it's still touch-and-go whether Metromedia Fiber Network
will be able to pull off the needed financing by Aug. 15, and, assuming it
does, whether it will be able to find further financing. Other analysts say the
company has valuable assets, substantial backlog and other alternatives that
should prevent it from seeking protection from creditors.
In a news release earlier Wednesday, the White Plains, N.Y., fiber-optic
communications network operator said the company received commitments from
affiliates for $180 million of the $287.5 million it needs to obtain financing
of $62.5 million from Citigroup Inc.'s (C) Citicorp USA by Aug. 15. The
affiliates' commitments are subject to the closing of $200 million in vendor
financing and the completion of the Citicorp facility.
Although Metromedia Fiber didn't say which affiliates committed to the $180
million, Vik Grover, an analyst at Kaufman Brothers L.P., said it's likely that
the company would get continued support from majority shareholder Metromedia
Co., whose principals include John Kluge and Stuart Subotnik. The two men are
worth between $10 billion to $14 billion individually and "could lose the bulk
of their substantial investments in MFNX if it folds," Grover wrote in a report
Wednesday.
Grover also said that the company could borrow against its backlog, which was
reported at more than $4 billion last winter, and get more investment from
Verizon Communications (VZ). Verizon invested $1.6 billion in Metromedia Fiber
stock and would stand to lose its unsecured stake, as well as the ability to
use Metromedia Fiber as a prime contractor in its own network if it goes under,
Grover said in the note.
Regardless of where the $180 million is coming from, Metromedia Fiber's
assets are critical to the elimination of the telecom bottleneck that surrounds
metropolitan areas, said Cary Robinson, an analyst at U.S. Bancorp Piper
Jaffray.
"We believe they have unprecedented assets," said Robinson, adding that
companies that want to provide high-speed fiber optic service have very few
sources other than Metromedia Fiber and Level 3 Communications Inc. (LVLT) for
the so-called "dark fiber."
"So we think somebody is going to recognize there is value in that asset and
put money into the company," Robinson said. "It doesn't necessarily have to be
a bank."
Robinson, who said he has a personal holding in the stock, said that if
Metromedia Fiber doesn't get the financing it needs to continue operating,
"it's game over for most the telecoms. If Metromedia fails, our view is that
the majority of new entrants will fail."
A Metromedia Fiber spokesman couldn't immediately be reached for comment.
However, in the news release earlier Wednesday, President and Chief Operating
Officer Nick Tanzi said, "We're working extremely hard to obtain this financing
in a challenging funding environment."
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