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Friday, 1 June, 2001, 18:58 GMT 19:58 UK
US internet firm files for bankruptcy
PSINet's website
PSINet admits its debts are more than its assets
A leading US internet service provider, PSINet, has filed for bankruptcy protection from its creditors.

The company said that its liabilities - money owed - was nearly double its assets.


They lost the confidence of the Street, had too much debt and were burning through too much cash

Jonathan Savas
Merrill Lynch
In April, PSINet first warned that it might go under after it reported a loss of $3.2bn during its fourth quarter and defaulted on loan repayments linked to equipment leases.

The company has struggled with rapidly declining demand, in the face of a US economic slowdown.

"They lost the confidence of the Street, had too much debt and were burning through too much cash," said Jonathan Savas, director of high-yield telecommunications research at Merrill Lynch.

Hoping to emerge

On Friday the ISP said it had filed for Chapter 11 bankruptcy - which means it could still emerge after restructuring as a going concern.

"Our existing capital structure did not permit us to respond to the rapid changes in our markets," said Harry G. Hobbs, president and chief executive of PSINet.

He said he expects the Chapter 11 filing "will provide us with the flexibility and time to explore all strategic alternatives".

The bankruptcy filing covers 24 of its subsidiaries in the US and four Canadian subsidiaries.

PSINet companies in Asia, Europe, and Latin America, and its Metamor consulting business are not involved.

Still serving customers

The company will continue to service customers, although it hopes to sell its operations in Canada and Panama, if regulators agree.

It has also asked the bankruptcy court for permission to continue paying its employees, and plans to pay vendors on a timely basis.

PSINet, based in Ashburn, Virginia, provides corporate internet access and private networks.

It also offers web and database hosting and managed internet security.

It has total assets of $2.2bn and total liabilities of $4.3bn.

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See also:

17 Apr 01 | Business
Leading US internet firm may sink
31 Jan 01 | Business
Europe's web firms keep burning cash
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