Nortel 雪上加霜: lost US$8.1M Payment
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Here coming is the news!!!
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Nortel client defaults on $8M payment
Weak sales, troubles with customers place strain on bottom line
Lisa Levenson, with files from Bert Hill
The Ottawa Citizen
Tuesday, April 02, 2002
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Nortel Networks' hopes to return to profitability this year took another hit yesterday as a troubled U.S. customer defaulted on an equipment payment.
Metromedia Fiber Network Inc. slid closer to bankruptcy after it missed an $8.1-million U.S. payment to Nortel. Metromedia, based in White Plains, New York, announced it was replacing its CEO and another top executive.
The Nortel payment was due Friday on $231 million of term notes, Metromedia said in a statement. Metromedia missed a $30-million payment to Verizon Communications Inc. two weeks ago.
Nortel is under pressure from its banks to return to profitability by the end of the year. But weak sales to healthy customers and troubles at weak customers like Metromedia are creating troubles.
Metromedia, which leases space on its fibre-optic network to let businesses send data at high speeds within cities, is controlled by billionaire John Kluge. It may seek bankruptcy protection if it can't renegotiate its debt, which was $3.3 billion U.S. as of Feb. 28.
Metromedia had renegotiated its debt load last October but failed to make payments.
"Everybody thought the company had dodged a bullet and could possibly be a survivor, but obviously it didn't make it even with the new financing," said Eric Tutterow, fixed-income analyst at KDP Investment Advisors in Chicago.
The missed payment triggered default provisions on $343 million in Metromedia debt to Verizon, Bechtel Corp. and Citicorp USA, all of which provided financing to build Metromedia's networks. Equipment providers backed the purchases of startup telephone and Internet companies in exchange for a share of future growth.
The company's bonds traded at six cents to eight cents on the dollar, down from about 20 cents a few weeks ago, said Jerry Paul, managing partner at Quixote Capital Management LLC. A bankruptcy filing is "pretty much a given," he said.
"It's going to be another telecom workout," Mr. Paul said. "These guys have some valuable assets. It's a matter of figuring that out, and the value, and what can be done to rehabilitate (the balance sheet)."
The company, which is selling assets to reduce costs after customers cut spending on data services, replaced chief executive and president Mark Spagnolo with former MCI Communications Corp. executive John Gerdelman, and named former Salomon Smith Barney investment banker Robert Doherty as executive vice-president, finance and administration, replacing CFO Randall Lay.
In an unrelated development, ONI Systems said that Nortel had dropped four of five patent infringement cases against the San Jose-based optical networking company.
Nortel has been fighting ONI, which is being bought by Ciena Systems, for more than two years. ONI successfully recruited Nortel engineers in Montreal and Ottawa to develop a rival metropolitan optical product.
© Copyright 2002 The Ottawa Citizen
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Nortel client defaults on $8M payment
Weak sales, troubles with customers place strain on bottom line
Lisa Levenson, with files from Bert Hill
The Ottawa Citizen
Tuesday, April 02, 2002
ADVERTISEMENT
Nortel Networks' hopes to return to profitability this year took another hit yesterday as a troubled U.S. customer defaulted on an equipment payment.
Metromedia Fiber Network Inc. slid closer to bankruptcy after it missed an $8.1-million U.S. payment to Nortel. Metromedia, based in White Plains, New York, announced it was replacing its CEO and another top executive.
The Nortel payment was due Friday on $231 million of term notes, Metromedia said in a statement. Metromedia missed a $30-million payment to Verizon Communications Inc. two weeks ago.
Nortel is under pressure from its banks to return to profitability by the end of the year. But weak sales to healthy customers and troubles at weak customers like Metromedia are creating troubles.
Metromedia, which leases space on its fibre-optic network to let businesses send data at high speeds within cities, is controlled by billionaire John Kluge. It may seek bankruptcy protection if it can't renegotiate its debt, which was $3.3 billion U.S. as of Feb. 28.
Metromedia had renegotiated its debt load last October but failed to make payments.
"Everybody thought the company had dodged a bullet and could possibly be a survivor, but obviously it didn't make it even with the new financing," said Eric Tutterow, fixed-income analyst at KDP Investment Advisors in Chicago.
The missed payment triggered default provisions on $343 million in Metromedia debt to Verizon, Bechtel Corp. and Citicorp USA, all of which provided financing to build Metromedia's networks. Equipment providers backed the purchases of startup telephone and Internet companies in exchange for a share of future growth.
The company's bonds traded at six cents to eight cents on the dollar, down from about 20 cents a few weeks ago, said Jerry Paul, managing partner at Quixote Capital Management LLC. A bankruptcy filing is "pretty much a given," he said.
"It's going to be another telecom workout," Mr. Paul said. "These guys have some valuable assets. It's a matter of figuring that out, and the value, and what can be done to rehabilitate (the balance sheet)."
The company, which is selling assets to reduce costs after customers cut spending on data services, replaced chief executive and president Mark Spagnolo with former MCI Communications Corp. executive John Gerdelman, and named former Salomon Smith Barney investment banker Robert Doherty as executive vice-president, finance and administration, replacing CFO Randall Lay.
In an unrelated development, ONI Systems said that Nortel had dropped four of five patent infringement cases against the San Jose-based optical networking company.
Nortel has been fighting ONI, which is being bought by Ciena Systems, for more than two years. ONI successfully recruited Nortel engineers in Montreal and Ottawa to develop a rival metropolitan optical product.
© Copyright 2002 The Ottawa Citizen
