PSINet mulling sale

Large-scale Internet service provider (ISP) PSINet is considering a possible fire sale and has retained investment bank Goldman Sachs to consider “various financial alternatives’ and explore “other strategic considerations for improving shareholder value.” Those options could include “a strategic alliance or the possible sale of all or a portion of PSINet,” according to a company press release.

The ISP’s board of directors has also formed a special committee chaired by director Ralph J. Swett to review and consider the alternatives.

Stock in the self-proclaimed “Internet supercarrier” has drifted into the danger zone-below $2 per share-in the aftermath of disappointing third quarter results, an expected shortfall for the fourth quarter, and the resignation of its chief operating officer.

To add insult to injury, the company announced yesterday that a bank that had made a loan to PSINet Chairman William Schrader was in the process of selling up to 11.4 million shares of the company’s stock. Schrader had used the stock to secure a loan, and the bank was in the process of selling some or all of the shares as a result of a margin call.

For the third quarter, PSINet reported revenue of $352.5 million and a negative EBITDA of $13.8 million. The company reported a net loss of approximately $1.4 billion, and at the time said it was working on revised guidance for 2001.

PSINet also said it would scale back capital expenditures on hosting center construction to the tune of between $100 million and $200 million and planned to sell of a number of consulting solutions businesses that it acquired as part of its $1.9 billion purchase of Metamor Worldwide.