Suffering stock prices stand in the way of paying its preferred stock dividend, Rhythms NetConnections Inc. (Nasdaq: RTHM) said Tuesday. The company will defer payment of its $5.1 million quarterly dividend on its 6.75 percent Series F Cumulative Convertible Preferred Stock.
Shares in the provider of broadband communication services were up 0.03 to 1.69 Tuesday morning. The stock has suffered along with other DSL-related issues lately. The company said it will defer payment until market conditions become more favorable.
While Rhythms has sufficient cash to pay the $5.1 million quarterly dividend, Rhythms' debt indentures prohibit it from paying "cash" dividends; the company is required to issue shares and use the sale proceeds to pay dividends to the holders of the Series F Preferred Stock.
In light of current market conditions and the recent decline in the price of its common stock, Rhythms said it would have to sell about 4 million common shares to pay the $5.1 million dividend due this December 3, an action the company stated "would be inappropriate."
As of September 30, the company's cash, investments and restricted cash were $748 million, which should be enough to fund operation through the end of 2001, along with additional vendor equipment financing, the company said.