LV communications provider files for bankruptcy protection

Monday, March 26, 2001 | 10:41 a.m.

SUN STAFF AND WIRE REPORTS

WILMINGTON, Del. -- E.spire Communications Inc., an Internet and telephone service provider, and 49 subsidiaries filed for Chapter 11 bankruptcy protection Thursday amid a slowdown in the telecommunications industry.

E.spire, based in Herndon, Va., listed $911.2 million in assets and $1.47 billion in liabilities in papers filed in the U.S. Bankruptcy Court in Wilmington.

In February, E.spire said that it had defaulted on a $15 million interest payment due to bondholders. The company said it was negotiating with an informal committee representing a majority of its 13 3/4 percent bonds "with a view to achieving a consensual restructuring."

"We have been working closely with an informal committee of bondholders, representing more than 70 percent of our unaffiliated bondholders, and have received strong indications of support for a rapid restructuring," said George F. Schmitt, E.spire chairman and acting chief executive officer.

E.spire opened an office at 3944 E. Silvestri Lane in Las Vegas last June. It has a Las Vegas staff of 20, most of whom handle sales and marketing for the company. No layoffs in Southern Nevada are expected during the company's bankruptcy reorganization, said spokeswoman Peggy Disney.

Disney said the firm has 6,000 customers nationwide consisting of small to mid-size businesses. She declined to say how many customers it has in individual markets, such as Las Vegas.

Schmitt said the company would use the bankruptcy process "to complete the reorganization of our finances" and convert debt owed bondholders into reshuffled stock.

E.spire also said that it has secured a credit line of up to $85 million to bankroll its reorganization.

The lenders are led by Foothill Capital and Ableco Finance LLC and include E.spire's Schmitt.

With annual revenue of $344.2 million, E.spire on Feb. 15 reported a $293.6 million net loss for 2000, compared with a $277.7 million net loss in 1999.

E.spire's largest unsecured creditor is JP Morgan Chase & Co.'s Chase Manhattan Bank, which represents bondholders owed $905 million, court papers show.

Other leading unsecured creditors are Metromedia Fiber Network Services Inc., owed about $6.7 million, and Lucent Technologies, owed around $6.4 million.

E.spire joins several competitive local phone service providers to file for bankruptcy in Delaware in the past year, including GST Telecommunications Inc. in May, ICG Communications Inc. in November and Star Telecommunications Inc. last week.

Trading in E.spire shares, which have fallen more than 97 percent in the past year, was halted Thursday afternoon at 34 cents on the Nasdaq Stock Market. The shares reached a 52-week high of $13.31 on March 23, 2000.