PSINet bankruptcy appears imminent

On the verge of bankruptcy, Internet access and Web-hosting provider PSINet today confirmed it will default on debt payments after yesterday announcing several executive restructuring moves that included the resignation of co-founder and CEO William Schrader.

PSINet said it will default on a $20.1 million interest payment due today and will not make this month’s $16.6 million equipment lease and note payments.

Former PSINet president and chief operating officer Harry Hobbs was appointed to replace Schrader and was also named to the company’s board of directors. Additionally, the company reflected the sign of its economic times by naming current executive vice president and chief financial officer Lawrence Hyatt to the role of chief restructuring officer.

PSINet has been candid in recent months about its critical financial condition. The company announced last month that, even with successful restructuring efforts, its stock value could soon be worthless and it probably would not have enough cash to continue operations. In a regulatory filing last week, the company stated restructuring “efforts are likely to involve reorganization under the federal bankruptcy code.”

Although a spokesman for the company declined to comment on bankruptcy plans and said he would defer to the facts and comments in various press releases and regulatory filings, all roads appear to lead in one direction.

“Basically, they’re saying, ‘We’re going bankrupt pretty quick,” said Dan Renouard, vice president of research at Robert W. Baird & Company. “This is going to happen within the next week.”

PSINet shares were priced at 6 cents in mid-day Nasdaq trading. The company was delisted effective last week.