Thursday August 15, 12:29 pm Eastern Time
Dow Jones Business News
Genuity's Auditor Doubts Its Ability to Continue as 'Going Concern'
WASHINGTON -- Genuity Inc.'s auditor has substantial doubt about the Internet company's ability to stay in business, according to a quarterly report filed Wednesday with the Securities and Exchange Commission. Genuity, Woburn, Mass., a major carrier of Internet traffic, defaulted last month on a $2 billion bank line of credit and a $1.15 billion outstanding loan from Verizon Communications (NYSE:VZ - News) .
The default came after Verizon relinquished its right to take a controlling stake in Genuity, citing changing market conditions and changes in its needs.
On Tuesday, Genuity's lenders -- Verizon and a global banking consortium -- gave the company another 30 days to renegotiate debt.
According to the SEC filing, Genuity's default and its potential need to seek bankruptcy-court protection raise substantial doubt about the company's ability to continue as a "going concern."
If an auditor has substantial doubt about a client's ability to continue as a going concern; that is, to continue as a business for at least another 12 months, it must say so in its report on the company's financial statements.
Genuity has retained Lazard Freres & Co. as its financial adviser to help it develop a restructuring plan and is in talks with Verizon and its banks to restructure its obligations, but said in the filing that it may not be able to obtain satisfactory waivers or amendments.
If it can't satisfactorily restructure existing credit facilities, currently in default, Genuity's ability to find other financing to cover repayment of these facilities and fund operational needs would seem unlikely, in view of the company's situation and the difficulties in the telecommunications market, the filing said.
Meanwhile, Genuity said it continues to incur significant losses and negative cash flow from operations and expects to continue to do so in the future. |
