Financial Shell Game Continues For Metromedia

By weaving a complex and dangerous dance of financial wheeling and dealing between vendors and creditors, the fiber giant is slowly whittling away at its debt.

by Jim Wagner of internetnews.com [September 24, 2001]

Hanging on by a wing and a prayer, fiber giant Metromedia Fiber Network, Inc., executives announced they had secured $231 million in conditional financing from its vendors late last week to keep bankruptcy proceedings at bay.

Shareholders can only shake their heads in amazement as financial experts from their high-tech investment sign on one conditional financing agreement after another to avoid the headsman's axe.

It all began in late August, when Metromedia got $235 million in conditional financing from its vendors, provided it could close its $150 million loan deal with Citicorp made on Aug. 20 and secure another $50 million in financing.

The Verizon subsidiary then got another $150 million note from Citicorp, conditional on wrapping up its August deal with vendors.

That deal was conditional on Metromedia being able to pay off $235 million in vendor financing, even though officials at the time said they could not "provide any assurances that it will be able to consummate any of the financings it is pursuing."

Hardly reassuring, but five days later Metromedia executives were somehow able to convince its vendors to extend their loan commitment five days past the original due date, to September 17th.

It should be noted that the entire time Metromedia officials were threatening to file bankruptcy proceedings if they couldn't meet their financial obligations, a situation nobody wants. Investors know they will get a pittance, if anything, after the fiber company's creditors take back pennies on the dollar of their own investment. Metromedia's vendors know they will lose out on any future purchases by the fiber company if it goes under.

Which leads to last week'sannouncement, a continuation of the house-of-cards scenario reported earlier. Metromedia hopes to reduce its debt piecemeal, a couple million of dollars at a time, until it can meet all its financial commitments.

The company's made inroads, to be sure, reducing its vendor debts by $3 million, from $234 million to $231 million, in less than a month.

The current vendor agreement expires September 28th.

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