Genuity has made a $100 million acquisition, but it didn’t gain another company, patented
technology and new production plant. Instead, it purchased something perhaps more valuable — time.
The Woburn, Mass., provider of Internet protocol networking services wrote checks to eight lenders for a two-week “standstill agreement” that will hopefully allow
it to revise its credit terms.
Genuity is still reeling from Verizon Communications‘ decision last week not to re-integrate the company.
The New York phone giant based its decision on a “variety of factors, including market conditions and Verizon’s business needs.” Industry watchers said Verizon
saw no use in adding overhead when it could still contract for Internet services from Genuity and others.
“We are evaluating all of our options, as there are many potential paths to take,” said Paul R. Gudonis, Genuity chairman and CEO.
To help it, Genuity has retained Lazard Freres & Co. as its financial advisor. The most attractive is finding another large telecommunications partner to take a stake.
But with carriers melting down because of external (the economy) or internal (accounting fraud) factors, serious contenders are few.
That may leave Genuity with the unpleasant task of restructuring. For days, Gudonis has maintained that the Verizon pullout (which he claims caught him by surprise)
as a non-fatal blow.
“I want to assure our employees, customers and suppliers that, with $1.2 billion in cash, business operations will continue without interruption, and we will provide
our customers with the service and support they have come to expect from Genuity,” Gudonis said.
With the creditor deal, Genuity has bought itself two weeks, however, after that, the clock begins ticking again.
