Genuity internet backbone company files for bankruptcy protection

Genuity Inc., an integral player of the network that supports the internet, filed for bankruptcy protection on Wednesday (Nov. 27), reported the Associated Press (AP).

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By  Massoud Derhally Published  November 28, 2002

Genuity Inc., an internet backbone company, filed for bankruptcy protection on Wednesday (Nov. 27), reported the Associated Press (AP). Investors in Genuity include former parent Verizon Communications and Citigroup.

The company’s assets will be transferred to Level 3 Communications Inc. for US $242 million. Level 3 will run Genuity as a separate business. In 2002, Genuity reduced spending and cut 30% of its workforce. It faced another setback when Verizon announced it would not retake over control, as originally planned, and Genuity filed for bankruptcy and agreed to be acquired by Level 3.

Based in Woburn, Mass., Genuity operates an international IP network. The company provides dial-up and dedicated Internet access, transport, managed security and VPN, hosting and other services to communications companies, enterprises and government agencies. Its largest customers are Verizon and America Online, which accounted for more than 60% of its $223 million in revenue for the third quarter of 2002.

Genuity’s fall into bankruptcy began in July, when Verizon said it would not exercise an option to regain control of the Broomfield, Colo.-based company, putting Genuity in default of a $2 billion line of credit, reported AP.

Under the terms of the Level 3-Genuity agreement:

-- Level 3 will pay up to $242 million in cash and assume a significant portion of existing long-term operating agreements for Genuity's U.S. assets and operations;

-- Level 3's cash consideration at closing could be reduced subject to certain material adjustments;

-- The cash on Genuity's balance sheet, together with Level 3's cash consideration, will be distributed to creditors of Genuity;

-- Closing is subject to, among other customary conditions, receipt of Hart-Scott-Rodino approval and other relevant regulatory approvals, as well as bankruptcy court approval.

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