With a previous two-week extension about to expire, Genuity
will pay its bank creditors
$50 million for an additional month’s grace.
The Woburn, Mass., provider of Internet protocol neworking services needs to resolve a $2 billion credit line from a consortium of banks and a $1.15 billion loan
from Verizon Communications
to avoid bankruptcy.
In addition to the payment, the banks, Verizon, and Genuity agreed to pursue revisions to its credit terms.
“While we still have a ways to go, we believe that by renegotiating our credit facilities and continuing to restructure our business plan, Genuity will be positioned for
future success,” said Paul Gudonis, Genuity chairman and CEO.
Genuity is reeling from Verizon’s decision not to re-integrate the company.
In addition to redrafting credit pacts, Genuity is also restructuring operations. Its first step is to cut off funding to European Web and application hosting company
Integra. Genuity bought 93 percent of the firm last fall for about $106 million in stock.
“This was a difficult decision to make because, while Integra was on track to meet its corporate financial goals, it still would have taken some time before it was able
to fund the business on its own,” Gudonis said.
Some analysts, like Lisa Pierce at Boston’s Giga Group, questioned the deal, noting that that
overseas market was already overcrowded and “due for a meltdown.”
In the meantime, Gudonis maintains that Genuity still has “sufficient cash on hand to operate our business,” and said customer should not notice any interuption in
Genuity was formerly the Internet division of GTE Corp. and spun out as part of GTE’s merger with Bell Atlantic, now Verizon, in 2000.
Following the merger, Genuity spent millions of dollars on advertising and corporate sponsorship of golf tournaments and other events to raise the profile of the company and its Black Rocket service.
But as large customers delayed or canceled orders for IT infrastructure, Genuity suffered.