June 20, 2003 -- Cogent Communications Group, Inc. has reached an agreement to restructure its debt and raise $41 million from investors that will fund its operations, the company said today.
In April the Washington DC provider said it was in breach of loan covenants and might be forced to file for bankruptcy if it was unable to renegotiate its agreement with lender Cisco Systems Capital.
Cogent did not detail the restructuring in its press release. But media reports indicate it has restructured $263 million owed to Cisco Systems Inc, agreeing to pay Cisco $20 million in cash, grant a new note for $17 million and give the San Jose-based equipment maker an 18 percent stake in the company.
The equity financing will be provided by JVP (Jerusalem Venture Partners), Oak Investment Partners, Worldview Technology Partners, Broadview Capital Partners, Boulder Ventures and Nassau Capital. Following the transaction the investors, Cisco Capital, and employees will own 99 percent of the company.
Cogent said the agreement completes a six-month process in which it has reduced its total debt from a face amount of over $380 million to $27 million. The company has also extended repayment terms, with the company's first principal payment due in 2006. Cogent previously retired $107 million in subordinated debt,
"Cogent now has one of the strongest balance sheets in the ISP sector," said Helen Lee, the CFO of Cogent. "Moreover, with this financing the company will have sufficient funds for its growth and operations."
"This is an exceptional round for Cogent and its investors, as the company has significantly outperformed the sector while greatly limiting its debt exposure," said Erel Margalit, managing partner of Jerusalem Venture Partners. "We look forward to Cogent's continued growth as it positions itself to take full advantage of the telecom recovery."
"Cogent continues to perform well by providing value and service at a price per megabit that remains unmatched in the marketplace today," said Dave Schaeffer, CEO Cogent Communications. "Cogent remains confident and focused in our ability to continue to provide value to customers looking for high quality, high capacity Internet service at an affordable price."
The earlier default was triggered when Cogent's revenue declined from $16 million in the third quarter of 2002 to $13.8 million in the fourth quarter, caused primarily by cancellations from customers acquired from PSINet earlier in the year. Those cancellations more than offset the new business acquired by Cogent in the quarter.
For the full year, Cogent lost $91.8 million. The company has 204 employees and leases about 335,000 square feet of space for its headquarters and network operations.
Cogent Communications is a Tier 1, facilities based, all-optical ISP focused on delivering ultra-high speed Internet access and transport services to businesses in the office market and to ISPs. The company is based in Washington, DC.