PSINet CEO sells shares to cover loan

The head of troubled backbone provider PSINet (Nasdaq: PSIX) has to sell millions of his company's shares to cover a margin call.

PSINet on Thursday said chairman and CEO William L. Schrader was forced to sell 11.4 million shares used to secure a bank loan. A margin call requires an investor to put up cash or securities to back the stock bought with borrowed funds.

Shares of PSINet dipped to 1.7187 in afterhours activity on the Island electronic communications network, following the news. PSINet stock rose 0.188 to 2 in Thursday's regular trading after the company announced the hiring of Goldman Sachs & Co. (NYSE: GS) to advise on alliances or a possible sale.

Schrader is the second CEO of a high profile communications company caught in a margin call in the last couple of months. Worldcom (Nasdaq: WCOM) CEO Bernard Ebbers recently sold 3 million Worldcom shares to cover a call.

Executives of PSINet have previously said the company would explore strategic alternatives. PSINet shares have plummeted over the last several months as the company, in an attempt to expand beyond its core bandwidth services business, moved into e-commerce consulting services just as that market turned south.

PSINet reported disappointing financial results in two of the last four quarters, and warned that the current quarter would be weak as well.