TRADE IDEA - Buy PSINet bonds - Chase
Sep 18, 2000 10:48 AM ET
Reuters
NEW YORK, Sept 18 (Reuters) - Notwithstanding PSINet
Inc.'s
announcement Friday that its second-half
revenues
would fall short of expectations, Chase Securities Inc.
recommends that investors buy the Internet access
and
Web-hosting service provider's bonds.
"We believe that PSINet represents one of the most
compelling combinations of strategic, fundamental and
speculative appeal in the Internet/data sector of the
telecommunications market," Chase said. "We believe investors
that are patient and can tolerate market volatility will be
well rewarded over the course of the next 12 months."
Ashburn, Va.-based PSINet said weakness in its carrier
access business, slow growth in its transactions services
business and slower revenue growth from Internet services
provider Xpedior Inc., of which it owns 80 percent,
would push second-half revenues down.
The announcement caused its bonds to fall, traders said,
and its stock to fall $2-11/16 on Nasdaq to close at $11-3/4.
PSINet said second half revenues should total $920 million
to $960 million, with earnings before interest, taxes,
depreciation and amortization (EBITDA) coming in between $5
million and $15 million.
For 2001, PSINet expects revenues of $2.3 billion to $2.5
billion, with EBITDA of between $161 million and $250 million.
The company said it expects to end 2000 with $500 million
in cash, and need $600 million of funding in 2001. It said it
has flexibility to raise this amount from a variety of
financial sources, and may sell certain nonstrategic assets to
do so.
Chase said PSINet's financial guidance "should help to
alleviate investors' concerns about the clarity of future
profitability."
PSINet, it said, has an international footprint that is
"one of the most attractive in the industry. We are also strong
proponents of the company's recent initiatives aimed at layering
higher-margin products and services, such as web hosting, on top
of its existing IP (Internet protocol) network infrastructure."
PSINet's senior debt is rated "B3" by Moody's Investors
Service and "B-minus" by Standard & Poor's.
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