Jan 16, 2001 12:00 PM,

Genuity pulls bond sale

Vincent Ryan

(Telephony) Just when it looked like the corporate debt market was opening up again, Web hosting provider Genuity cast a slight pall over matters, announcing that it is postponing a $2 billion bond sale, its first planned offering of debt securities.

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Genuity said the postponement was made because the company wants to assess the current slowdown in economic activity and IT spending as well as the company’s own flow of new orders. Genuity also hasn’t completed its end-of-year audit.

“It is not the bond market per se, but the slowdown in economic activity,” a spokeswoman said. She declined to elaborate further.

In December, Genuity-a spin off of the Bell Atlantic-GTE merger that is 9.5% owned by Verizon Communications-announced it was curbing spending on its network infrastructure. The company said it would be investing $7 billion to $9 billion between 2001 and 2004, lower than the previous estimate of $9 billion to $11 billion.

On January 8, Genuity said customer orders for the fourth quarter were off 17%, mostly due to a 44% decline in orders from carriers and Internet service providers. The company did not revise its earnings or revenue estimates for the fourth quarter at that time and is scheduled to release fourth quarter numbers on February 1.

While it waits for the right time to issue debt, Genuity said it will draw on its available sources of financing, which include cash, a credit line and potential funding from Verizon Communications. Those sources total between $5 billion and $6 billion.

The market for corporate bonds looked to be on the rebound last week, when a record $24.6 billion in debt was issued. Just last Friday, KPNQwest, the Dutch joint venture, raised $475 million in a junk bond offering, and Sprint announced today that it is proceeding with the sale of $2 billion of global senior unsecured debt.

Additionally, BT is rumored to be selling between $4.76 billion and $9.4 billion in debt in six tranches. The carrier sold $10 billion in corporate debt last month, the largest investment-grade issue ever.