Nothing Left for Shareholders After Genuity Liquidation

Creditors still don’t know how much they’ll get after Genuity’s remaining assets are sold. But shareholders do — zero.

“Genuity believes that its stockholders will not receive any proceeds from the liquidation and that its common stock will have no value in connection with the liquidation,” the Woburn, Mass., firm said in a regulatory filing yesterday.

The statement, though unsurprising, is the final blow for investors of the Woburn, Mass., wholesale Internet protocol services provider that at one time boasted annual revenues of more than $1.2 billion and a payroll of 4,400 employees.

The bulk of Genuity’s valuable assets, most notably its Tier 1 network, was sold to Level 3 Communications in February for $137 million in cash, significantly less than the $242 million when the acquisition was first floated in November.

According to the company’s Securities and Exchange Commission filing, Genuity has about 100 full-time employees “remaining to finalize the affairs of Genuity.” That includes closing up several small units that were not part of the Level 3 deal.

Genuity’s balance sheet still has $3.3 billion in liabilities (most owed to banks), which the company is working to negotiate down with creditors. Because the claims process is ongoing, Genuity said it’s unclear when the liquidation would be completed.

Genuity’s demise follows a 3-year roller coaster ride. Formerly the Internet division of GTE Corp., Genuity spun out as part of GTE’s merger with Bell Atlantic, now Verizon Communications, in 2000.

Following the merger, Genuity spent millions of dollars on advertising and corporate sponsorship of golf tournaments and other events to raise the profile of the company and its Black Rocket service. It occupied expansive offices situated between Interstate 93 and Rte. 128.

But as large customers delayed or canceled orders for IT equipment and services, Genuity suffered and was forced to cut staff. Then, last summer, Verizon decided not to reintegrate the company, leaving management searching for a survival strategy.

Broomfield, Colo.-based Level 3, which was sitting on a $500 million war chest from investor Warren Buffett, saw the struggling company as a bargain.

Genuity shareholders wish they could say the same.

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