By @NY Staff
Two senior executives of long haul fiber carrier Metromedia Fiber Network, Inc. , have stepped down after the company missed payments on about $674 million worth of bonds and notes.
Mark Spagnolo, president and chief executive officer, and Randall Lay, senior vice president and chief financial officer, resigned Monday as the company announced it may have to file for bankruptcy after missing another round of loan and interest payments.
The board of directors named John W. Gerdelman as president and chief executive of the company and Robert F. Doherty as executive vice president to take their places immediately as the debt-laden telco tries to right its ship.
The New York-based telco missed an $8.1 million payment to Nortel Networks on Friday, on a $231 million note, which triggered a cross-default on about $674 million worth of notes to holders that include Citicorp and Bechtel Corporation.
In addition, it missed a deferred interest payment on $975 million worth of notes issued to Verizon Communications and may not be able to make a payment on a 30-day grace period it arranged.
The current defaults throw into jeopardy a $611 million financing package that it arranged last fall after it missed a payment on part of that deal, triggering cross defaults on other notes.
The news comes about a week after it announced that, with $3.3 billion in debts, it would likely seek bankruptcy protection after it skipped a $30 million loan payment to Verizon.
The company has about $37.3 million cash on hand to fund operations and has already lowered its predicted 2002 earnings before interest, taxes, depreciation and amortization (EBITDA) by an unknown amount.
Metromedia officials have said they are restructuring their operations, to include a possible $50 million sale of their Internet exchange, PAIX.net, Inc., along with an equity investment in the buyer’s company. Escrow payments on the transfer at closing would cost roughly $4.5 million, while the remaining assets would be used to pay off debts.
The company blames the “general downturn in the global communications industry” for its current situation, despite substantial funding from some of Wall Street’s big investment firms.
Metromedia has already signaled its plans to seek protection in the courts; before securing financing last year, executives warned investors they would seek Chapter 11 relief if they couldn’t get more financing.
Company officials say they are exploring other opportunities beyond the
sale of PAIX to satisfy near- and medium-term liquidity needs.
Metromedia, whose shares closed at 9 cents Monday, also said it would delay filing its annual report because of the payment problems it is working out. The 10K is expected by April 16th.
