e.spire declares bankruptcy, keeps operating
e.spire Communications filed for bankruptcy today under Chapter 11 of the Bankruptcy Act. The company continues to operate and has arranged $85 million in “debtor in possession” financing. e.spire had been negotiating with its bondholders to restructure its debt after missing a $15 million interest payment on its $885 million debt last month.
“e.spire will use this period to complete the reorganization of our finances and the equitization of our bondholder debt,” said George F. Schmitt, chairman and acting CEO, in a prepared statement. “We have been working closely with an informal committee of bondholders, representing more than 70% of our unaffiliated bondholders, and have received strong indications of support for a rapid restructuring.”
Schmitt has put his own money into the debtor-in-possession financing group led by Foothill Capital and Abelco Financing LLC. Schmitt previously said he would resign rather than file for bankruptcy. However, a prepared indicates Schmitt “is now convinced that filing for Chapter 11 protection will give e.spire an opportunity to obtain the necessary funding to continue to run the company.” According to the statement, “filing for Chapter 11 was the only way the company could obtain funding at this time.”
The filing comes in the wake of relatively good news for e.spire, which has been the arena of management upheaval and market turmoil for nearly two years. In the fourth quarter of 2000, e.spire turned EBITDA-positive for the first time.
A hearing on e.spire’s petition is scheduled for Tuesday before U.S. Bankruptcy Court Judge Peter J. Walsh, who also is presiding over the Chapter 11 bankruptcy of ICG Communications, which filed for protection last November.
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