360networks denies bankruptcy is near
16:21 GMT-04:00 Tuesday, April 24, 2001
Vancouver — 360networks Inc. , facing speculation over its ability to repay debt, Tuesday reassured investors that it was meeting debt payments and was not about to seek bankruptcy protection, but its stock plunged as jittery investors headed for the door.
In a quick bid to squelch the damaging speculation, 360networks, which builds fibre-optic networks, said in a release that it is "in full compliance with all covenants under the company's $1.2-billion senior secured credit facility."
"I would say that today's announcement is clear evidence that we are not seeking bankruptcy protection," said Michelle Gagne, director of corporate communications.
But it was not enough to calm investors, who knocked the stock down 83 cents, or 25 per cent, to $2.42, making it the biggest loser on the Toronto Stock Exchange in percentage terms.
360networks shares are worth a tiny fraction of their 52-week high of $35.90, reached amid euphoria about the company's prospects.
"It certainly has had a disappointing career. Here it is at a 52-week low," said Fred Ketchen, director of equity trading at ScotiaMcLeod, in Toronto.
"One hopes that what they have said today about their financial situation is meaningful. They say they are not seeking bankruptcy protection. I have to believe them."
In its release, 360networks said it drew $350-million from the credit facility late last year and continues to draw money to complete the development of a global fibre-optic network. It was confident it could pay interest on time.
"As a result of cash on hand, sales contracts with customers and credit facilities available to us, we are comfortable that we can meet such obligations," Vanessa Wittman, chief financial officer, said in the release.
"We recognize that these are difficult markets for all of us, but 360networks has always met its debt obligations and we are taking appropriate internal measures to ensure this will not change going forward."
360networks, like most players in the telecommunications sector, has suffered from a deterioration in telecom companies' ability to spend on infrastructure as the U.S. economy erodes.
In March the company slashed its earnings, cash revenue and capital expenditure targets for 2001 and said it would cut capital expenditures and put on hold the building of another transatlantic fibre-optic cable.
Customers, predominately telecom firms or big users of high-speed Internet connections, are cutting earnings and revenue targets, slashing capital expenditure budgets, shrinking inventories, negotiating payment delays and having a hard time tapping capital markets.
The company also said on Tuesday that first quarter sales to major carriers and network service providers for services on its terrestrial and undersea networks totaled more than $475-million.
Although Mr. Ketchen said the company's huge debt burden of $1.2-billion may appear onerous, he noted many similar companies carry the same debt levels.
But market watchers wonder if the company's actions are the case of being too little, too late.
"I think there are negative vibes about some of these things and people have decided they just want out of it," Mr. Ketchen said.
Copyright © 2001 The Globe and Mail
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