Metomedia Fiber Network, Inc. , officials filed for
voluntary Chapter 11 Bankruptcy protection Monday, nearly a week after
announcing it would not be able to meet a $32 million interest payment on
its $650 million senior debt notes.
The bankruptcy comes on the same day Nasdaq delisted the company for
failing to meet listing requirements on the stock exchange, namely for
trading below the $1 per share value for one month and failing to file a
2001 annual report and first quarter 2002 report with the U.S. Security and
Exchange Commission.
The company admits its finances are in shambles, saying its auditor KPMG
couldn’t review the carrier’s balance books because they found its
“internal systems and controls so flawed.” Nasdaq temporarily took the
stock off its ticker last month until MFN restated its first three quarters
of 2001.
USB Warburg and Impala Partners have been hired to assist in the
restructuring process.
John Gerdelman, Metromedia president and chief executive officer, said the
first order of business is reassuring customers, then moving quickly to get
the business back to normal.
“We are committed to taking the painful but necessary steps to ensure
stability and long term success for our company,” he said. “Our objective
is to move through Chapter 11 expeditiously and have the ‘new MFN’ emerge
with a sound capital structure and operational base, fully positioned to
take advantage of market opportunities.”
To get finances back in order, executives say they have reached consensus
on several moves: shedding vendor contracts, job cuts, getting rid of idle
data centers and other expensive property with senior and an agreement
secured lenders.
For several months, executives have known they over-built the company and
the bankruptcy is the best method to regroup.
“We believe that our core metro-fiber and data center businesses are some
of the best assets in the telecommunications industry,” Gerdelman
said. “However, in growing the business we, along with others in the
industry, out-paced the demand and, as a result, are overbuilt.”
MFN has known for some time it would need to shed much of its operations to
remain viable down the road. With its original vendor
financing extension deal back in September 2001, the carrier has been
playing a shell game of sorts
to keep debtors off its back while it sought a strategy to come out on in
the red.
The Verizon Communications subsidiary has been playing a
shell game with its senior management the past several months, announcing
in October 2001 a new president and chief operating officer (Mark Spagnolo)
and chief executive officer (Nick Tanzi) at the same time it came
out of bankruptcy after shedding its debt and restructuring its
business model.
