MFNX UPDATE 2-Metromedia warns may seek bankruptcy
(adds details, updates share price)
NEW YORK, Sept 7 (Reuters) - Metromedia Fiber Network Inc.
<MFNX.O>, a telecommunications company that builds high-speed
fiber optic networks in cities, warned Friday it would file for
bankruptcy if it fails to finalize its financing agreements,
triggering a slide in its stock price.
If Metromedia gets the necessary funding, it warned that
its stockholders' holdings would be "significantly diluted"
because it would have to issue equity to the parties providing
the financing. If it fails to get funding, it said, it would
seek bankruptcy protection.
Shares of Metromedia, which is backed by Verizon
Communications <VZ.N> and other wealthy investors, fell 25
cents, or 28 percent, to 64 cents a share in afternoon trading
on Nasdaq.
The stock has fallen about 98 percent over the past year
amid a sharp sell-off in emerging telecommunications companies
battered by the slowing U.S. economy, heavy competition, and a
marked tightening of capital markets.
Metromedia said it received an extension until Sept. 12 on
a $235 vendor financing pact. Vendor financing is usually debt
financing that equipment sellers give purchasers of their
equipment. In exchange, the vendor usually takes a security
interest in the equipment, and sometimes in other assets.
It also signed a deal for $150 million in funding led by
Citicorp USA, but its various funding agreements are contingent
on the completion of each other. That requires Metromedia to
sort out the conditions placed on all the deals before any
funding is finalized.
Among the requirements, Metromedia must finalize its $230
million convertible debt financing pact, $180 million of which
has been committed to by company affiliates, and $50 million of
which has been committed to by an unnamed investor.
Metromedia also must get agreements from other vendors to
defer payments owed to them. The company on Wednesday received
approval from debt holders to waive defaults on some notes.
If Metromedia gets the necessary money to sustain its
business, analysts expect it to focus on its major markets and
defer construction in small and mid-sized cities.
The company may announce various cost-cutting efforts,
following its recent move to cut its work force to 1,600
employees, down from 2,500 in March, analysts said.
Credit rating agency Moody's Investors Service last week
cut the company's rating, citing "heightened concern that,
after months of protracted financing negotiations with vendors,
banks and associated companies, the company has to date
obtained no unconditional funding commitment."
The agency said it was concerned that Metromedia Fiber
would need to raise additional funding, or further scale back
its business plans.
Emerging carriers such as Teligent Inc., 360networks Inc.,
Viatel Inc., Winstar Communications Inc. Covad Communications
Group Inc., and PSINet Inc. filed for bankruptcy this year.
(( -- Jessica Hall, Philadelphia newsroom 215-717-7713;
jessica.hall@reuters.com, Deepa Babington, New York Newsroom,
646-223-6129))
REUTERS
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