Covad says trio of cash offers in cards
The high-speed ISP says it is entertaining three different offers for enough cash to get it back into the black by the end of 2003.
The offers are for $200 million--the same cash pile that Chief Executive Charles Hoffman says the company needs to return to profitability by the third quarter of 2003. A Covad representative would not release additional details about the offers, including who is doing the offering.
The funding could be key to getting Covad back on its feet. The company has already finalized plans with what it calls a "majority" of the creditors owed $1.4 billion. The entire debt would be eliminated for 19 cents on the dollar, plus a 15 percent stake in the company when it emerges from bankruptcy, according to Covad.
Covad has been actively seeking the $200 million ever since it filed for bankruptcy Aug. 15. At the time, the company said it expected to pay a total of $283.3 million to bondholders and would have $250 million in cash remaining to keep it running until the beginning of next year.
The company, however, continues to struggle. In its second-quarter earnings, Covad reported an operating loss of $142 million on revenue of $87.1 million. That compares with an operating loss of $153 million on revenue of $43.2 million for the same quarter a year ago.
Most analysts have lost interest in the company, and none of the major brokerage houses even cover Covad. When told about Hoffman's unsubstantiated offers, one analyst at Banc of America Securities said, "So?"
If Covad does make it back from bankruptcy, another twist would be added to its history. The company was once one of Silicon Valley's most promising upstarts, but now it is a poster child for the collapse of the Internet bubble.
An initial public stock offering in January 1999 provided a financial boost that eventually pushed Covad's market value to well over $10 billion.
But in less than two years, Covad's market value plunged to less than $158 million, and the company is struggling to shore up its finances after burning through more than $3 million a day since 2000. In June, it shut down its BlueStar Communications subsidiary.