ICG tries to pull itself together

Court OKs $200 million in financing to keep bankrupt firm open From the detox unit of corporate life - Chapter 11 of the Bankruptcy Act - ICG Communications says it's getting its head together. In a couple of months its executives claim they will have a business plan designed to take the company to profitability.

In a snapshot, of course, the ICG situation still looks pretty awful. It has about $450 million in revenues and more than twice that in debt; it has stopped growing and filed for bankruptcy. Its stock is trading over the counter for pennies after being de-listed by the Nasdaq stock market. The company and its former officers and directors are defendants in class-action lawsuits.

However, ICG CEO Randall Curran is taking the company through the equivalent of a 12-step program. He's laid off 300 people, closed some offices, killed expansion in 22 markets and nixed plans to build a parking garage next to the company's headquarters in Englewood, Colo. The Denver Post recently quoted him as saying, "You have to slow down. Companies are like people. If they have wounds and you give them time, they'll heal."

Helping apply salve to ICG's wounds is Chase Manhattan Bank, which made $200 million in debtor-in-possession financing available and is trying to syndicate an additional $150 million. Debtor-in-possession financing allows a bankrupt company to keep operating and to retain the equipment and pay the employees it needs. The attraction for Chase is that it goes to the front of the creditors' line.

A spokeswoman for ICG, which claims to have $150 million in cash, said the package will take the company "through the restructuring" process that is expected to take six to nine months from its bankruptcy filing on Nov. 14, 2000.

ICG's heavy debt load and the diminished valuations of most telecom companies may make ICG a difficult choice for a potential buyer. But an independent ICG may be hard to sustain, too. "I don't know if its realistic or not," said Terry Barnich, president and CEO of New Paradigm Resources Group. "I've heard they've got a lot of assets that need upgrading, which would require some pretty deep pockets to see it continue as a stand-alone proposition." ICG officials insist their assets are up to date.

For Mike Kallet, ICG's executive vice president of network operations, the recent past has not been a pleasant memory. Kallet, who was in product management until taking his present job three months ago, said the network was doing fine with its standard products, which account for 80% of its business, but went into delirium tremens with Internet remote access service, or IRAS.

"Data networking is different from switched networking, and you have to run it differently," he said. "I think we tried to run it the same way."

In the fall, users dialing up through ISPs using ICG as a backbone provider got through about 70% of the time, Kallet said. "It was bad, very, very bad," he said. "We were... well, it was bad."

Now, the dial-up success rate on the ICG network is 90%, Kallet said.

At least one customer, NetZero, confirms those figures but indicates that the network problems, if not the financial consequences, were not unique to ICG.

"They had the same sort of problems everybody had," said Jon Fetveit, executive vice president of strategic planning for NetZero. Nonetheless, NetZero pulled its traffic off ICG's network and shifted it to its other carriers until conditions improved, he said.

Kallet credits Cisco Systems, to which ICG owes $32 million, for much of the network improvements. "They treat us as if we don't owe them any money, as if we're a big potential customer," Kallet said.

Cisco had 60 people working in ICG headquarters to help streamline processes and reduce the number of duplicative software systems, Kallet said.

"First, we implemented some processes in how to deploy new stuff into the network," Kallet said. "In the past, we would deploy new versions of operating systems, code, new modems, whatever, into the network in what I would consider to be a haphazard... way that caused more problems than it solved. So we put some discipline in there.

"This was not rocket science. We didn't do anything that any good network company wouldn't have done."