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Metromedia Fiber Network, Inc., a New York provider of optical networks and IP services to carriers, government and enterprises, said on Monday that it may go bankrupt if it cannot restructure its debt.
The warning came as part of an announcement from Metromedia that it would miss a $30 million interest payment on $975 million in subordinated convertible notes held by Verizon Communications, Inc.
The company would not have been able to pay Verizon and still meet near-term cash requirements, officials said. As of February 28 of this year Metromedia had $3.3 billion in consolidated indebtedness and $37.3 million of unrestricted cash and cash equivalents.
Hence, Metromedia said it is attempting to restructure its debt. If it cannot do so, it will seek Chapter-11 protection, officials said. Any potential restructuring of the debt “may result in substantial dilution to . . . existing stockholders,” the company also warned.
As to potential interruptions of service, Richard Dym, senior VP of marketing for Metromedia said, “We dont expect there to be any interruption of service.”
“Weve announced that we have a cash flow problem and were working to solve it, and we dont expect it to have any impact at all on our customers,” Dym said. “Were we forced to file for protection under Chapter 11, it is certainly our intention that we will continue operating and serving our customers as an ongoing business, as we reorganized our financials.”
Metromedia also said it was scrapping a number of previous guidance statements on revenue, EBITDA (earnings before interest, taxes, depreciation and amortization) and capital expenditures. The company said it could not provide any guidance at this time.
Metromedia also announced that it has entered into a “non-binding” letter of intent to sell its PAIX facilities for approximately $50 million in cash and an equity interest in the purchaser. These are neutral peering facilities which link networks together, including those of ISPs and private network providers.
If that deal does go through, it is expected to close in the second quarter of 2002, said officials, although they warned there are no assurances it will be consummated. A spokesperson for Metromedia declined to identify the potential purchaser.