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PSINet plunges on exec change, revamp

News of executive changes and debt restructuring knock the wind out of the struggling ISP as shares drop nearly 74 percent.

News of executive changes and debt restructuring knocked the wind out of PSINet on Monday as shares dropped nearly 74 percent.

The struggling Internet service provider named a new president and chief operating officer, and hired a financial adviser to explore restructuring its debt to bondholders and others.

The Ashburn, Va.-based company also announced the resignation of James F. Cragg, a former executive vice president and divisional president who oversaw North American operations.

By market close, the company's already deflated stock had dropped 53 cents to 19 cents, approximately 74 percent. Earlier, shares touched 9 cents.

Even if PSINet is successful in restructuring its debt, "it is likely that the common stock of the company will have no value, and the indebtedness of the company will be worth significantly less than face value," the company said.

Dresdner Kleinwort Wasserstein was hired to handle the debt restructuring, and will work with Goldman Sachs, which was retained last November to advise the company on financial alternatives, including the sale of non-core businesses as well as the possible sale or merger of the entire company.

PSINet had already announced plans to sell its e-commerce data communications division in a deal worth $300 million. The company, whose shares have been in freefall since hitting a 52-week high of $51, closed Friday at 72 cents. The shares tumbled even further in premarket trading Monday, dipping 17 cents to 55 cents.

The struggling company warned last year that it would need additional funding to make it through 2001. But it seems the $300 million may not be enough.

PSINet is expected to lose $1.06 per share for the fourth quarter and $5.07 per share for the fiscal year, according to a survey of analysts by First Call.

Harry G. Hobbs, who will take on the president and COO positions, previously served as executive vice president and divisional president of PSINet?s international operations.