International virtual private network (VPN) carrier Genuity, which has offices in Dublin, is to be acquired by Nasdaq listed comms and IT firm, Level 3 for US$242 million, in what appears to be a financial rescue package.
To enable the acquisition to happen, various subsidiaries of Genuity will have to file voluntary petitions for bankruptcy under Chapter 11 of the US Bankruptcy Code.
Genuity established an office in Ireland in 2000 and operates a point-of-presence (PoP) at CityWest Business Park. The acquisition, subject to financial adjustments, has been approved by Genuity’s two largest creditors; a consortium of banks that provide the company with a line of credit, and Verizon Communications, which provides Genuity with its own separate line of credit.
Level 3 will operate Genuity as a separate business unit focusing on managed internet protocol services for the enterprise market and will add its 3,000 corporate customers to Level 3’s customer network.
The acquisition includes Genuity’s Tier 1 network in the US, which carries enormous domestic contracts such as America Online (AOL) as well as domestic contracts with Verizon.
As part of its agreement with Level 3, various subsidiaries of Genuity will have to file voluntary petitions for bankruptcy under Chapter 11. Assuming approval of the company’s reorganisation plan by the bankruptcy court and the closing of the transaction, Genuity’s creditors will receive the money Level 3 is paying for Genuity’s assets, as well as additional cash on Genuity’s balance sheet. With more than US$800 million in cash to fund the company’s operations, Genuity is understood to have guaranteed customers that it will continue to provide its services without interruption during the transitional period.
Under the transaction process, certain assets of Genuity will go under the block. As required under Section 363 of the Chapter 11 bankruptcy code, a motion was filed for the establishment of bidding procedures for an auction that allows other qualified bidders to submit better offers for its assets. The company expects that the acquisition will be completed in the first quarter of 2003.
The news follows several months of negotiation with the group of banks that provided Genuity’s US$2 billion line of credit and Verizon Communications, which lent Genuity US$1.15 billion on a restructuring of the company’s debt.
By John Kennedy