PSINet files for Chapter 11 bankruptcy PSINet files for Chapter 11 bankruptcy
ASHBURN, Va., June 1 (Reuters) - Internet access provider PSINet Inc. (PSIX.OB) said on Friday it and 24 of its units have filed for Chapter 11 bankruptcy protection because they could not keep up with changing market conditions and rapid declines in demand for their services.
The company, with cash assets of about $300 million, filed for protection in the U.S. Bankruptcy Court for the Southern District of New York.
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.
'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,' President and Chief Executive Harry Hobbs said.
PSINet 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.
The company, which also provides Web hosting services that run corporations' Internet sites, has defaulted on interest, equipment and debt payments and had its stock delisted from Nasdaq.
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, the company said it would not meet a deadline to file its quarterly financial report with regulators. British telecommunications company Cable & Wireless Plc (CW.L) had said earlier this month that it was mulling the purchase of certain PSINet assets but was in no rush to spend its money.
Four Canadian units also have filed for protection in the Ontario Superior Court of Justice. The company said Canadian telecommunications firm TELUS (T.TO) has offered to buy its Canadian operations.
The proposed purchase is subject to conditions that include approvals by regulators and the bankruptcy court.
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.
10:31 06-01-01
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