PSINet has hired investment bank Goldman Sachs to help it consider its financial and strategic options, and is working with bankers at Dresdner Kleinwort Wasserstein to explore ways to pay creditors after yesterday reporting net losses for 2000 of $5.03bn (Pounds 3.51bn).
At the end of last year auditors PriceWaterhouseCoopers LLP qualified PSINet as a going concern, but its current financial position means the company is not expected to meet anticipated cash needs.
PSINet, which delayed the announcement of year-end results by two weeks to warn of its position, reported revenues of $996m for the year, almost double the $534m generated in 1999.
However, these were dwarfed by billions of dollars worth of charges and write-offs which, by 10 April, had left the firm with approximately $520m in cash, cash equivalents, short-term investments and marketable assets.
PSINet said this reserve, even if it were added to the $330m it expects from recent asset sales, was not likely to be enough to meet its cash needs and that it expected to reorganise under bankruptcy laws.
PSINet has already received notice of default from equipment lessors totalling $68.1m, who have agree not take any action for the time being.
However the company said: ‘There can be no assurance as to how long any lessor will continue to forbear. With respect to certain leases, the forbearance period could potentially expire as early as 27 April 2001 if the Company does not meet certain requirements.’
And analyst Gartner has already warned firms not to consider PSINet for new contracts, and has advised those companies which currently use the service to look elsewhere.
- This article first appeared on vnunet.com. Additional reporting by Larry Schlesinger.
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