NorthPoint Labors On Despite Bankruptcy
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NorthPoint Communications, Inc., filed for Chapter 11 bankruptcy protection Tuesday night and announced the immediate sale of most of its business and equipment to likely buyers.
Officials also sent a letter to investors and customers last night assuring them service would not be disconnected and business would go on as usual while it waits for a buyer to take over operations, or regain its financial footing.
Lenders floated the competitive local exchange carrier $38 million to continue operations through the first quarter, $25 million of which was immediately available. The remaining $13 million will be doled out if NorthPoint meets unspecified conditions.
The filing comes one month after Verizon Communications stepped away from a $800 million merger deal that could've spared the financially strapped competitive local exchange carrier.
Liz Fetter, NorthPoint president and chief executive officer, said Verizon is to blame for yesterday's decision.
"When Verizon unexpectedly pulled out of the merger and its interim funding obligations, which we believe was a breach of Verizon's agreements with NorthPoint, it created a funding shortfall," Fetter said. Chapter 11 protection will provide NorthPoint with protection from creditors while enhancing our ability to meet our obligations to customers and vendors by reducing or restructuring our immediate financial obligations. NorthPoint plans to use this 'breathing room' to look for a financially sound strategic partner who is interested in our network, our skilled and dedicated employees and our attractive customer base."
NorthPoint sued Verizon for $1 billion last month, claiming the telco terminated the deal without cause. Since then, the CLEC has been shoring up its operations to save as much money as it could.
After laying off 248 employees, NorthPoint quickly severed its overseas ventures, selling its European stake in VersaPoint to Versatel and its Canadian venture with Call-Net Enterprises.