I believe that a member of the PSIX board, cognizant of his fiduciary responsibilities to shareholders and bondholders should attempt to recruit an extremely strong finance/ops guy to step in right now. The situation is not beyond salvage. I have a specific suggestion.
I know of no better choice to attempt a fresh turnaround (or disciplined sale of the company should that be the best option) than John Walpuck. You may never have heard of him, but he used to be a quiet, but major player within PSI management -- see: psi.net
I first met Mr. Walpuck in 1995 when he was in charge of Western Hemisphere M&A for MCI. I was amazed at his analytical depth and knowledge. He joined PSI shortly after MCI merged with Worldcom. Walpuck became the driving force behind PSI's global ISP acquisitions.
My understanding is that he strongly dissented regarding the Metamor acquisition and left the company shortly thereafter, frustrated about its operations and direction.
Regardless of whether PSI's rapid acquisition policy was right or wrong, what I know is that Walpuck is an absolutely brilliant financial strategist who could re-capture respect form the street, and provide a bridge from current management to a restructured PSI.
I believe that without William Schrader's daring early leadership, the company could never have achieved its growth and stature. But Mr. Schrader and a rational Board need to realize that significant top level change is required immediately.
In my opinion, the Board should arrange for Mr. Schrader to step down and perhaps remain affiliated as a consultant to the Board. Despite current circumstances he deserves meaningful recognition, and compensation if the company ultimately succeeds with a graceful transition of leadership.
Consider how Wall Street would regard a much more disciplined PSI under new leadership, with 1-2 billion in new cash and some restructuring of existing debt. Despite the bleak situation and economy, this is conceivable. Vast sums of money have come out of equities and are still looking for a home in turnaround financing & bond markets.
Under new management, I can envision PSI obtaining the necessary capital via one last high yield bond (structured most likely as a convertible debenture). Schrader and the existing team cannot do this under present circumstances/perceptions, but a white knight turnaround CEO might be able to put it together -- with support from PSIX investment bankers. Shoring up PSI's finances would salvage value for existing bondholders and equity investors.
Contrast PSIX and LVLT. Both companies have enormous revenue momentum and would/will trend toward positive cashflow and earnings justifying multi-billion dollar market caps. PSIX is practically out of money and is valued at near nil; LVLT has a considerable treasury of cash. LVLT is way off its highs, but still commands a market cap of nearly 6 billion dollars. |
