- The Washington Times - Monday, February 19, 2001

E.Spire Communications Inc. dodged an immediate threat last month by the Nasdaq stock market to have its lagging stock delisted.

It could still be delisted, but bigger hurdles await the Herndon-based telecommunications company, and the next several weeks could determine whether it remains in business or is acquired by a healthier company.

E.Spire Chief Financial Officer Bradley Sparks says the company has just $7.4 million.

The company, founded in 1993, could run out of money by the end of March, and E.Spire is searching for ways to stave off bondholders and raise money to fund operations.

Its debt has reached $850 million.

E.Spire Chairman George F. Schmitt says he is working with bondholders to turn the money it owes creditors into equity in the form of shares of stock in the company.

"If things go as I hope they do, before we run out of money we will have a deal with bondholders to take our debt off the balance sheet," Mr. Schmitt told investors in a conference call last week.

E.Spire missed a Feb. 15 deadline for making a $15 million interest payment on its debt.

Discussions with bondholders on a plan to turn the debt into equity have been constructive, Mr. Sparks says, but it's still not clear whether E.Spire will be able to work out an agreement.

In addition to the continuing talks to restructure its massive debt, E.Spire executives are taking offers for its two subsidiaries ASCI Network Technologies Inc., a fiber-optic construction company, and CyberGate Inc., an Internet company that markets Web-hosting services.

ASCI Network Technologies is worth $500 million to $1 billion, according to the company's own estimates. CyberGate is worth $50 million to $100 million, the company says.

But E.Spire not just its subsidiaries also could be an acquisition target of a larger telecommunications provider.

"In the sector we're in, there will always be mergers and acquisitions," E.Spire spokeswoman Peggy Disney says.

E.Spire operates a fiber-optic network in 38 cities along the East Coast and in the South. It had 1,806 workers on Dec. 31.

Its desperate search for cash and its attempt to restructure the mounting debt are occurring at a time when E.Spire just completed its best fiscal quarter ever. The company last week reported revenue for the quarter ending Dec. 31 of $93.9 million, up from $57.5 million for the same quarter in 1999.

That has created a measure of optimism.

"I'm really proud of what this company accomplished the last few quarters," Mr. Schmitt says.

But the company still had a net loss of $78.1 million for the quarter and a net loss of $293.5 million for the year.

In addition to searching for money, E.Spire must also find a way to boost its stock price. Its poorly performing stock could still be delisted from Nasdaq.

It closed at $1.08 a share Friday, down 25 cents.

The reprieve it got from Nasdaq on Jan. 31 was temporary.

E.Spire has until April 2 to get its stock to $5. Then it must keep it above $5 a share for 10 consecutive trading days to remain on the Nasdaq national market. The stock market could move E.Spire to its small cap stock market.

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