PSINet drops on sale of unit

2 min read

Shares of PSINet fell more than 31 percent after the company said it had agreed to sell its e-commerce data communications unit for $300 million. Despite the cash boost, the company said it will likely need to restructure or renegotiate some of its obligations to third parties.

In early trading on Tuesday, the company's stock lost 31 cents to 69 cents.

PSINet (Nasdaq: PSIX) shares have been in freefall in recent months, down from a 52-week high of $55.75. The troubled Internet service provider's glum third-quarter performance left investors with no reason to believe its situation will improve.

The company is expected to bring in a loss of $1.04 in its upcoming fourth quarter, and has been exploring the sale of assets and ways to cut capital spending.

Under the current sales deal, the Ashburn, Va.-based company said it has agreed to sell its PSINet Transaction Solutions to an investment group led by GTCR Golder Rauner for $300 million. PSINet said it will treat the unit sale as a discontinued operation, and the company will report a loss on disposal of $300 million.

The company said the deal, which is expected to close by the end of April, is subject to certain unspecified adjustments.

Despite the anticipated sale of the transaction-solutions unit and other efforts, company officials said it is likely that PSINet will need to restructure or renegotiate some of its obligations to third parties. The company added that if some of these obligations were not resolved, it may be forced to default on its debt securities.

However, PSINet officials said the cash from the anticipated sale of the unit will increase the company's financial flexibility as it evaluates its financial and strategic options.

Separately, the company said it had completed the sale of its PSINet Consulting Solutions business, along with a San Francisco facility that was to be used as a Web hosting center. Terms were not disclosed for either transaction.

As of March 2, the company said it had $300 million of cash, cash equivalents, short-term investments and marketable securities in its coffers.