psinet slides into bankruptcy _ computerworld
TRANSCRIPT
FEATURE
PSINet slides into bankruptcy
By Scarlet Pruitt, IDG News ServiceIDG News Service | Jun 1, 2001 1:00 AM PT
Beleaguered Internet service provider PSINet Inc. said today that it's filing for Chapter 11 bankruptcy protection, along with 24 of its U.S. subsidiaries andfour of its Canadian operations.
The Ashburn, Va.-based company said that its Asian, European and Latin American operations, as well as its Metamor Worldwide Inc. consultingbusiness, aren't affected by the filings, however, and that all of its subsidiaries will continue to provide customer support.
News of PSINet's bankruptcy filings came as no surprise to observers who have watched the firm's downward-spiraling activities during the past fewmonths after overextending itself in a series of acquisitions.
Shortly after PSINet announced job cuts and a fourth-quarter loss of $3.2 billion in April, it was de-listed from the Nasdaq Stock Market. The serviceprovider hired a new CEO in late April and said it was restructuring, but the steps weren't enough to keep the company from seeking bankruptcyprotection.
PSINet's U.S. operations filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York today, while four of itsCanadian subsidiaries filed for bankruptcy protection under Canada's Companies' Creditors Arrangement Act.
In Chapter 11 bankruptcy, a company is relieved from the threat of creditors' lawsuits while the court oversees a financial reorganization. PSINet hasasked the courts in the U.S. and Canada that it be allowed to continue to provide employees with their normal salaries and benefits but said that it'sreviewing its options and is considering a sale of the company.
The company said in a statement that it still holds some $300 million in unrestricted cash, cash equivalents, short-term investments and marketablesecurities, which it will use to fund operations during its restructuring period.
PSINet President and CEO Harry G. Hobbs said in the statement that the restructuring was necessary because the company's operations weren't flexibleenough to respond to changes in the market.
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In further news, PSINet announced that it signed a letter of intent with Burnaby, British Columbia-based telecommunications firm Telus Corp. to sellPSINet's Canadian operations and subsidiaries. The proposed sale is subject to regulatory approval and approval under bankruptcy proceedings, thecompany said. Furthermore, the Internet service provider said that it has entered a definitive stock purchase agreement for the sale of its operations inPanama to REE Panama SA and is considering alternatives for its Latin American operations.
Related stories:
Cable & Wireless to purchase Digital Island, May 21, 2000
PSINet to restructure after $1.4 billion third-quarter loss, Nov. 3, 2000
PSINet buys IT service firm, March 22, 2000
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