| Cogent Financial Problems Worsen
- Defaults On Debt Faces Chapter 11
Bankruptcy Filing If It Can't Renegotiate Debt To Cisco
(see also
Colocation Facility Ratings for the rating and reviews of this
Internet Data Center)
April 1, 2003 - Cogent Communications said yesterday that it is in
breach of loan covenants and may be forced to file for bankruptcy if
it is unable to renegotiate its agreement with lender Cisco Systems
Capital. Cogent revealed the default in a filing with the SEC. The company
said its revenues for the fourth quarter of 2002 had fallen short of
minimums required by its credit facility with Cisco. The Washington, DC provider of connectivity and colocation said it
is in "active discussions" with Cisco to restructure the loan. Cisco
will not fund an additional $25 million Cogent had been expecting
this year, and the filing made it clear that the company's fate lies
entirely in Cisco's hands. "This default permits Cisco Capital, if it wishes, to accelerate and
require us to pay the approximately $262.7 million we owed Cisco
Capital as of March 28, 2003," Cogent stated in the filing. "Should
Cisco Capital accelerate the due date of our indebtedness we would
be unable to repay it. "If it accelerates the indebtedness, Cisco Capital could make use of
its rights as a secured lender to take possession of all of our
assets," the filing added. "In that event we may be forced to file
for bankruptcy protection." The immediate impact to Cogent is a loss of additional funding from
Cisco, which was to fund $25 million in five monthly installments
between May and September.
Cogent said the funding had been included in its business plan. "As a result of the default, we are no longer entitled to these
funds," Cogent said. "We do not anticipate that Cisco Capital will
loan additional working capital to us." The company has $42.8
million in cash or cash equivalents, according to the SEC filing. Cogent's revenue declined from $16 million in the third quarter of
2002 to $13.8 million in the fourth quarter, caused primarily by
cancellations from customers acquired from PSINet earlier in the
year. Those cancellations more than offset the new business acquired
by Cogent in the quarter. For the full year, Cogent lost $91.8 million. The company has 204
employees and leases about 335,000 square feet of space for its
headquarters and network operations. Cogent shares lost 20 percent of their value in early trading on the
NASDAQ stock exchange, falling 10 cents to 40 cents per share.
Cogent Communications is a Tier 1, facilities based, all-optical ISP
focused on delivering ultra-high speed Internet access and transport
services to businesses in the office market and to ISPs. The company
is based in Washington, DC.
|
