USi Files under Chapter 11

Add application service provider USinternetworking to the growing list of companies filing for Chapter 11 bankruptcy protection.

Add application service provider USinternetworking to the growing list of companies filing for Chapter 11 bankruptcy protection. The company filed a pre-negotiated Chapter 11 petition Jan. 7, while also announcing a finalized commitment from Bain Capital Partners for a $106-million investment once USi emerges from bankruptcy. The company predicts that will happen this spring.

USi, which has been struggling for months under the weight of $120 million in debt, was able to get the majority of its creditors to agree to payment terms, which allowed the company to file a pre-negotiated Chapter 11 petition, explains USi spokesman Christopher Walker. "The court action now becomes somewhat routine," he says. "The judge will be able to entertain dissent by outlying creditors, and, then, generally what happens in these cases is that the deal we struck with most of our creditors becomes applicable to all."

USis customers were told ahead of time about the companys plans to reorganize under Chapter 11, and so far none have left the company as a result, Walker says.

Does this mean the ASP poster child is home free? Not by a long shot, say some industry watchers.

"Going Chapter 11 means uncertainty for customers. There are no guarantees," says Counse Broders, principal analyst for Internet services at Current Analysis. "USi might follow the path of Covad and come out, but then again, it may not."