Metromedia Fiber Network, a technology firm which owns a $75 million (€85.2 million) data centre in Dublin, moved a step closer to bankruptcy yesterday when it defaulted on an interest payment due on its $3.3 billion debt.
The company, which is backed by US telecoms firm Verizon Communications, also said both its new chief executive and its new chief financial officer had resigned, and it had begun talks with its creditors on restructuring.
Metromedia is the latest in a series of telecoms and internet firms with Irish operations to get into financial trouble. Several internet data centres - hi-tech operations which manage IT systems and websites - recently closed in Dublin, and the future of cable firm NTL remains in doubt as it attempts to restructure huge debts.
Metromedia said yesterday it missed an $8.1 million interest payment on $231 million in debt originally held by Nortel Networks. It said this triggered a "cross default" on several other issues of debt and its lenders may demand repayment of the entire amount of the debt at any time.
The firm reiterated that it had deferred a $30 million interest payment on $975 million in debt held by Verizon, and it would be in default if it failed to make the payment by the end of a grace period on April 15th.
Metromedia's mounting financial troubles come just six months after the firm secured a $611 million financing package, modified debt payments and named new executives who investors hoped would stave off bankruptcy.
The company said it would begin talks with its creditors regarding a consensual restructuring of its debt, which totalled $3.3 billion as of February 28th. If it is unable to restructure, it may be forced to file for bankruptcy.
Metromedia said Mr Mark Spagnolo, its new president and chief executive, and Mr Randall Lay, its new chief financial officer, had decided to leave the company. It named Mr John Gerdelman, a managing partner of a venture capital firm, to succeed Mr Spagnolo. Mr Robert Doherty, a managing director in Salomon Smith Barney's investment banking division, will serve as executive vice-president of finance and administration.
Shares in Metromedia have fallen about 98 per cent over the past year as the telecommunications sector has been battered by bankruptcies, heavy competition and a glut of fiber-optic networks. The firm's shares were trading at nine cents yesterday.
Global Crossing and 360Networks, two other international telecoms firms with significant Irish operations, have already filed for bankruptcy protection in the US. These firms built up massive debts building global fibre optic networks in anticipation of demand from dotcoms and other firms.
(Additional reporting, Reuters)
