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PSINet files for bankruptcy protection

In the latest bid to stem its financial meltdown, the troubled Internet service provider seeks Chapter 11 protection and sells off some business operations.

In the latest bid to stem its financial meltdown, Internet service provider PSINet Friday said it filed for Chapter 11 bankruptcy protection along with 24 of its subsidiaries in the United States.

Four Canadian subsidiaries also have filed for protection under that country's Companies' Creditors Arrangement Act (CCAA). PSINet also said it is selling off a number of its business operations in Canada and Latin America. see related story: PSINet loses its connection

PSINet signed a letter of intent with Canadian wireless company Telus, which offered to purchase PSINet's Canadian operations and facilities, the company said in a statement. The Ashburn, Va.-based ISP said it also entered into a stock-purchase agreement for the sale of its operations in Panama to REE Panama, and it closed the sale of business operations in Puerto Rico. Terms of these transactions were not disclosed.

PSINet's fortunes have fallen hard over the past year. Last month, the company said it would default on $20.1 million in interest payments on corporate bonds due in May and would miss lease payments to several equipment companies. That sum will be added to $68.1 million in previous default notices from manufacturers that lent PSINet money to buy their equipment.

The company has also formed a reorganization committee and hired a new chief executive officer--former PSINet President Harry Hobbs, who replaced William Schrader in April.

Others in the communications field have also felt the sting of a technology industry slowdown, including Flashcom, NorthPoint Communications and Covad Communications. Even some of the leaders in the sector--from equipment makers such as Cisco Systems, Nortel Networks and Lucent Technologies to telecommunications giants such as AT&T and Worldcom--have suffered in the downturn.

PSINet says that it and all of its subsidiaries will continue to provide reliable service to customers. At the time of the filing, the company said the businesses involved had on hand approximately $300 million in unrestricted cash, cash equivalents, short-term investments and marketable securities.