With $3.3 billion in debts, Metromedia Fiber Network, Inc. is giving every indication it will seek bankruptcy protection
with its decision Monday to forgo a $30 million payment to a creditor.
The company has only $37.3 million cash on hand to fund operations.
Verizon Communications officials were told Friday they
would not be receiving an interest payment on its $975 million loan to the
long-haul fiber carrier, though officials at the two companies are
negotiating an alternative.
The announcement comes at the same time the troubled “carrier’s carrier”
lowered its predicted 2002 earnings before interest, taxes, depreciation
and amortization (EBITDA) by an unkown amount. Enough, obviously, to force
the company to seek other means to recoup losses in the face of its many debts.
Metromedia officials say 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. It’s a shell
game Metromedia has been playing in ever-increasing moves to avoid
Chapter 11 bankruptcy.
Company officials say they are exploring other opportunities beyond the
sale of PAIX to satisfy near- and medium-term liquidity needs.
This is the second
time Metromedia has 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 financing.