- The Washington Times - Wednesday, April 18, 2001

PSINet Inc. filed an annual report yesterday revealing massive losses and looming debt.

The company reported a fourth-quarter loss of $3.2 billion on revenue of $291.1 million. It lost nearly $5 billion last year, according to the regulatory filing with the Securities and Exchange Commission.

That exceeds its 1999 loss of $416 million.

"It's a huge loss and it makes it even more evident that a bankruptcy is what's going to happen," said F. Drake Johnstone, analyst and first vice president at Richmond investment banker Davenport & Co.

PSINet, an Internet-service provider based in Ashburn, Va., also repeated yesterday it is likely to file for Chapter 11 bankruptcy protection from creditors. PSINet, which owed an estimated $3.6 billion as of Dec. 31, continues to try to sell its subsidiaries and other assets.

PSINet spokesman Eric McErlain declined to provide details on the company's efforts to sell its assets and also declined to say when the company would file for bankruptcy protection.

But in its SEC filing, PSINet gave a clearer picturer of its mounting debt.

The company said it was in default to vendors on $68.1 million in equipment leases for computers and other office equipment as of April 10. A forbearance period delaying payment of some of that debt could expire as soon as April 27.

PSINet also owes $164.9 million over the next five months in interest and dividend payments, according to the SEC filing.

Another pending expense is PSINet's lease or purchase of additional Internet capacity through fiber-optic cable and satellites. The company must pay $139.2 million to companies selling it bandwidth this year, under the terms of agreements already signed. PSINet also said it expects to pay another $290 million this year for equipment needed to make that new Internet bandwidth capable of transmitting data.

Finding the money to pay all those bills could be impossible, analysts said.

"It looks more and more every day like they are going into bankruptcy. They are doing their best to prepare people for that," said David Takata, senior vice president of research at New York investment bank Gerard Klauer Mattison.

That could result in the demise of one of Northern Virginia's oldest technology companies. William Schrader and Martin Schoffstall founded Performance Systems International in 1989, and it was the first business to market Internet access to companies.

The company still has cash. PSINet's cash and cash equivalents rose to $520 million on April 10, up from $254 million on March 30, through the sale of subsidiaries.

Earlier this month, the company sold PSINet Transaction Solutions to a group led by GTCR Golder Rauner LLC for about $285 million in cash. A PSINet subsidiary, Metamor Holdings, also completed the sale of its stake in Decan Groupe for about $34.6 million to Getronics International earlier this month.

PSINet reported a loss of $340.9 million on the sale of PSINet Transaction Solutions because it is a discontinued operation.

PSINet acquired 76 companies during the three-year period ending Dec. 31, it reported in its SEC filing.

Mr. Takata said he expects PSINet to hang on only three to five months longer.

Shares of PSINet have dropped more than 99 percent in the past year and were halted by the Nasdaq Stock Market April 3 at 19 cents.

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