Internet hosting company Globix has declared bankruptcy and announced a restructuring plan, which it says, should allow it to emerge from bankruptcy by early April.
The financial restructuring under the plan will reduce significantly the principal amount of the company’s outstanding indebtedness by approximately $480 million by converting a substantial portion of the company’s indebtedness into new common stock.
Moreover, the new debt to be issued under the plan will permit Globix to satisfy interest payments in kind for at least two years and, at the discretion of the company’s board of directors, up to four years, thereby eliminating a liquidity concern arising from current debt service obligations. The company believes that the restructuring will substantially reduce uncertainty with respect to its future and better position it to attract and maintain new customers.
The company intends to continue operating in Chapter 11 in the ordinary course of business. It intends to seek the necessary relief from the Bankruptcy Court to pay its employees, trade, and certain other creditors in full and on time, regardless of whether such claims arise prior to or after the Chapter 11 filing.
Peter Herzig, Chief Executive Officer, said, We are pleased to have received such overwhelming support from both our bondholders and preferred shareholders to proceed with the plan. As we take these steps to secure the company’s financial position, I am confident that we are doing all that is necessary to ensure a bright future for Globix. The successful execution of this plan will allow us to focus on developing Globix to its fullest potential as an industry-leading provider of hosting and advanced Internet services for enterprise businesses.
In addition, Globix reported financial results for its fiscal first quarter 2002 ended December 31, 2001. Revenue for the first quarter of fiscal 2002 was $23.4 million compared to $26.2 million in the prior year quarter. EBITDA loss (loss before net interest, income taxes, depreciation and amortization and restructuring charges) was $11.0 million for the first quarter of 2002 compared to $15.2 million in the same quarter last year.
As part of the company’s continued effort to reduce expenses and work towards reaching the important goal of turning cash flow positive, the company also reported that in recent weeks it has terminated approximately 30% of its workforce. The majority of those employees terminated performed functions related to providing internal services, peripheral client services and other functions not directly related to the company’s core business.