RealTime IT News

PSINet Fourth Quarter Report Overshadowed by $3.2 Billion Loss

PSINet officials, with their desultory announcement Monday of $3.2 billion in net losses for the fourth quarter 2000, said they were mulling a decision to file for bankruptcy to appease creditors.

What's more, one of its equipment lenders is calling for the former Internet industry giant to pay, at least in part by April 20, on leases that have defaulted. PSINet officials, who declined to name the vendor, remain unsure whether they could pay the bill.

With total revenues down for the fourth quarter, from $305.4 million to $291.1 million and a negative $92.3 million in earnings before interest, taxes, depreciation and amortization (EBITDA) and unusual charges, the company is in a bind to salvage what it can.

With trading halted by Nasdaq at 18 cents per share since April 3, PSINet has to act quickly. Officials have already announced that its common and preferred stock are likely worthless, and more delays could wipe out any assets due to creditors.

Officials were not available for comment on their plans, saying only that they are "exploring alternatives to restructure the company's obligations to its bond holders and other creditors."

To do that, the company is shedding some of its operations while it is still financially viable for them to do so.

The company's first move, before its fourth quarter results were announced, was to sell off its high-speed connectivity arm.

In a letter to its digital subscriber line customers Tuesday morning, PSINet officials thanked their customers for five years of great service and told them they would be switched to another provider, CAIS Internet Inc.

The PSINet missive stated that "during this process, PSINet and CAIS will work together to facilitate a seamless transition," before they turned off the power to the lines May 2. Until then, customers are able to move to CAIS without disruption to their DSL service.

PSINet officials also said the company has defaulted on $68.1 million in equipment leases, including the one lender demanding immediate payment. The other vendors have agreed not to take action until April 27.

The company has sunk in a rapid downward spiral from the heights it had achieved two years ago. Obstensibly an Internet service provider, the company went on a spending spree from a huge influx of funding buying up such diverse holdings as e-commerce and consulting companies.

The troubles began when the company couldn't find a way to integrate the many diverse operations, and took larger and larger losses as it looked for ways to streamline operations.

PSINet board members downplayed the extent of the damage until March, 2000, when they brought in a new president and financial advisor to restructure the company.