Popular nationwide cable Internet service provider (ISP) Excite@Home has a
bone to pick with one of its creditors, which officials say will put the
company out of business if a settlement isn’t reached over term conditions
that come due Friday.
On Monday, the company announced it was disputing the fact it is likely in
breach of contract for a $50 million secured loan made June 8. Promethean
Asset Management, LLC, a New York-based investment firm that manages two
investment firms that originally floated the loan, acknowledged it was
going to call @Home to task for failing to meet terms of the agreement.
But, officials said, they would “discuss @Home’s options and ways in which
the terms of the agreement could be honored,” a statement released by the
company stated.
Four days isn’t much time for @Home to come up with a viable solution and
many analysts and pundits are already predicting the demise, via
bankruptcy, of the popular company. Officials have confirmed this, saying
that full payment of its loan to pay off creditors would “have a materially
adverse impact on the company’s liquidity and its ability to fund its
operations.”
With roughly $1 billion in debt and a loss of $346 million in the month of
July alone, the embattled cable Internet provider recently switched
auditors last week from Ernst & Young, which has looked after the
@Home’s accounts since 1999.
They were replaced by PricewaterhouseCoopers, a move officials said they
were mulling long before Ernst & Young came out with its filing to the
Securities and Exchange Commission, calling @Home a “going concern” after
burning through much of the $185 million emergency funds it freed up after
renegotiating a backbone deal with part-owner AT&T and $100
million bond sale.
Announcements like these the past week do nothing to assuage shareholder
confidence, which has taken resulted in another plunge Monday to @Home
stock values on news of the imminent payment demands. Per share prices
that started the day at 50 cents per share quickly plummeted to 40 cents,
and have been bouncing between the two figures throughout the day.
The death of @Home, with more than double the number of cable Internet
subscribers (at 3.3 million) than its competitors RoadRunner (1.4 million)
and AT&T Broadband (1.3 million), would send millions of subscribers
scrambling for a new connection and casting further doubt on a sector
long-known for its shaky service.
@Home officials can point to the demise of a digital subscriber line (DSL)
provider for a crash course on the affects of a hasty sell
off. NorthPoint Communications, a data competitive local exchange
carrier (DLEC) out of California, filed for Chapter 7 bankruptcy protection
June 20. Creditors, instead of waiting for possible rebound in the markets
or “testing the waters” of potential buyers, demanded money immediately on
any remaining assets and in the end got little more than pennies on the
dollar from their investment.
Of course, creditors might not have gotten much more if they would have
waited, but the forced sell played into the hands of AT&T Broadband, which
got a great deal on a nationwide network of equipment for a bargain price
at $135 million.
@Home and Promethean officials were unavailable for comment.
