High-speed Internet provider NorthPoint Communications Group Inc. said late Tuesday that it has filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of California in San Francisco.
San Francisco-based NorthPoint is a provider of DSL (digital subscriber line) Internet access. NorthPoint had planned to merge with Verizon Communications Inc. last year.
The merger, however, was called off by Verizon in late November and created a funding shortfall for NorthPoint, company president and CEO Liz Fetter company said in a statement.
Filing for Chapter 11 will protect the company from creditors while allowing the company to meet its obligations to its customers, Fetter said. The company has secured a commitment of US$38 million from existing lenders to continue day-to-day operations. The company will receive $25 million immediately and will receive the remainder upon the completion of certain undisclosed conditions, the company said.
The company is also seeking a strategic partner and proceeding with a structured sale of substantially all its business assets. It will seek approval of open bid procedures from the U.S. Bankruptcy Court.
NorthPoint and Verizon announced on Aug. 7 that Verizon would purchase a 55 per cent interest in the high-speed Internet provider and the companies would merge their DSL operations. Verizon had planned to utilize its stake in NorthPoint to expand out of its core territories on the East Coast. But Verizon backed away from the deal in late November, citing NorthPoint’s deteriorating business and financial conditions.
The company has taken several cost-reduction steps since Verizon pulled out of the deal, estimated at $800 million when first announced, Fetter said, during a conference call Tuesday whose transcript is posted on the company’s Web site. Those include:
– reducing the company’s full-time workforce 19 per cent;
– consolidating the company’s employees from the corporate headquarters in San Francisco to operations in Emeryville, Calif.;
– selling the company’s interest in European broadband company VersaPoint to Versatel International NV for approximately $6.5 million;
– and selling the company’s stake in NorthPoint Canada Communications to Call-net Enterprises Inc. for cash.
The Nasdaq Stock Market halted trading on NorthPoint [NPNT] late Tuesday afternoon. Its last sale price was $1.40 a share. On Wednesday, the company’s trading status was changed to “additional information requested” from the company. Trading will remained halted until NorthPoint has satisfied Nasdaq’s request for additional information, Nasdaq said in a statement.
NorthPoint, in San Francisco, can be reached at http://www.northpoint.net/.