>I think what seperates great investors from the rest of us (or at least me) is they know when the best position is just plain old cash.
I think what separates great investors from the rest is knowing what to buy and knowing when to sell. Why do you think investment bankers make so much money?
Do you think Morgan Stanley knew when to dump new economy PISNet? I do!
>NEW YORK (Reuters) - Internet access provider PSINet Inc. said this week it has filed for Chapter 11 bankruptcy protection as it struggles with rapidly declining demand, becoming the latest high-technology concern to be hurt by the slowing economy.
The company, based in Ashburn, Virginia, joins several other tech firms that have been hurt by stiffer competition, the inability of customers to pay their bills, and the recent drying up of the capital markets amid growing economic uncertainty.
PSINet and 24 of its units filed for protection in the U.S. Bankruptcy Court for the Southern District of New York late on Thursday. Analysts said they had been expecting such a move for about the last six months.
"They lost the confidence of the Street, had too much debt and were burning through too much cash," Jonathan Savas, director of high-yield telecommunications research at Merrill Lynch, said on Friday.
Savas added that PSINet, which also provides Web hosting services that run corporations' Internet sites, also had some poorly timed acquisitions that it had problems integrating.
PSINet President and Chief Executive Harry Hobbs said in a statement, "We expect that the steps we are taking today will provide us with the flexibility and time to explore all strategic alternatives while we continue to deliver the reliable service upon which our customers depend."
At the time of the filing, PSINet had total assets of $2.2 billion and total liabilities of $4.3 billion, of which $2.9 billion is bond debt. It had cash assets of about $300 million.
NORTEL HAS BIGGEST UNSECURED TRADE CLAIM
The filing listed Wilmington Trust Co. as trustee for more than $2.7 billion of unsecured debt.
The largest unsecured trade creditor, according to the bankruptcy filing, is Nortel Networks Inc. , with $99.7 million in claims.
The largest other unsecured trade creditors, PSINet said, include Cisco Systems Inc. with $81 million; Broadwing Communications Service, $27.5 million; Leastec Corp., $26.3 million; GE Capital Corp., $21.3 million and Lucent Technologies Inc. , $20.7 million.
PSINet, whose stock has been delisted from Nasdaq, had earlier defaulted on $2.73 billion of debt, Standard & Poor's said, in the largest telecom bond default since passage of the Telecommunications Act of 1996, which was designed to encourage competition.
Katie Heagy, investment analyst at Federated Investors in Pittsburgh, said PSINet may be one of the last big high-tech companies to file for bankruptcy protection, but some smaller players may still have to go that route.
Telecoms NorthPoint Communications Group Inc., Winstar Communications Inc. and Viatel Inc. are among the companies that filed for bankruptcy protection this year.
PSINet said its cash balance will provide sufficient financial resources to fully fund operations during the anticipated restructuring period. Therefore, it said it declined the various debtor-in-possession financing options it received.
LOOKING AT ALL OPTIONS
PSINet said it continues to evaluate all strategic alternatives, including the sale of the company as well as the viability of a stand-alone reorganization.
Earlier this month, British telecommunications company Cable & Wireless Plc said it was mulling the purchase of certain PSINet assets but was in no rush to spend its money.
With so many assets on the market, Merrill Lynch's Savas said, it is difficult to ascertain what the ultimate recovery value for the company would be. PSINet will probably do several small asset sales, he added.
Four Canadian units also have filed for protection in the Ontario Superior Court of Justice. The company said Canadian telecommunications firm TELUS has offered to buy its Canadian operations.
The proposed purchase is subject conditions, including regulatory approval and approval under the bankruptcy proceedings.
PSINet agreed to sell its Panama operations to REE Panama SA for stock and has closed on the sale of substantially all of its Puerto Rico operations. Terms were not disclosed.
The filings do not involve PSINet's operating units in Asia, Europe, Latin America or its Metamor consulting business, all of which the company expects to continue to operate independently.
However, PSINet said it is considering all strategic options for its operations in Latin America and is in talks with a potential purchaser group.
The company said it has asked the courts for permission to continue to pay its employees. It also said it plans to pay vendors on a timely basis for goods and services they deliver after the filing date.
PSINet reiterated that it has retained Dresdner Kleinwort Wasserstein, Inc. as its investment banker and restructuring advisor. |
