WSJ article - PSI Net files Chapter 11
June 4, 2001
PSINet Makes Chapter 11 Filing
As It Struggles With Debt Load
By DEBORAH SOLOMON
Staff Reporter of THE WALL STREET JOURNAL
PSINet Inc., which has been struggling with nearly $3 billion in debt, said it
filed for protection under Chapter 11 of the U.S. Bankruptcy Code.
The Ashburn, Va., telecommunications company, which isn't profitable,
had warned recently that it would default on some interest payments in an
effort to conserve cash.
Following the filing in the U.S. Bankruptcy
Court for the Southern District of New York,
PSINet said in a statement that it planned to
evaluate all of its "strategic alternatives,
including the sale of the company as a going concern, as well as the
viability of a stand-alone reorganization."
PSINet, which provides Internet connections and hosts other companies'
Web sites, is the latest telecommunications company to be dragged down
by its crippling debt load. Two other telecom concerns, Teligent Inc. and
Winstar Communications Inc., recently filed for bankruptcy-court
protection and analysts expect additional bankruptcy-court filings down the
road.
Four Canadian subsidiaries of
PSINet also filed for protection
under the Companies' Creditors
Arrangement Act statutes in the
Ontario Superior Court of Justice.
PSINet said it signed a letter of
intent to sell PSINet's Canadian
operations and facilities to Telus
Corp., a Canadian
telecommunications concern.
PSINet has also signed an
agreement to sell its Panama
operations to REE Panama SA, and
has closed on the sale of
"substantially all" its business operations in Puerto Rico. Terms of the
transactions were not disclosed.
The company also said it is in talks to sell its operations in Latin America
but didn't reveal the name of the potential buyer or the price. The company
said the bankruptcy-court filing did not include its European and Asian
subsidiaries.
PSINet said the companies involved in the bankruptcy-court filings had
approximately $300 million of unrestricted cash, cash equivalents,
short-term investments and marketable securities on hand. The company
said it had total assets of $2.2 billion and total liabilities of $4.3 billion,
including $2.9 billion in bond debt. PSINet said it believes the cash "will
provide sufficient financial resources to fully fund operations during the
anticipated restructuring period." PSINet said it had turned down several
offers for debtor-in-possession financing.
Write to Deborah Solomon at deborah.solomon@wsj.com
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