COLO.COM Files Chapter 11
Company seeks debtor financing, promises to reorganize

May 9, 2001 -- COLO.COM, which operates a national network of 22 Internet data centers, filed for Chapter 11 bankruptcy protection late Tuesday.
The move follows weeks of industry speculation about the company's future. Bankruptcy papers in federal court in San Francisco contained little information about the company's financial situation. COLO.COM has until May 23 to file details with the court about its debts and assets and a list of creditors.
"Our decision to seek Chapter 11 relief was based on a conclusion that deliberate action was required at this time to preserve the operational strength and assets of the companies' businesses while we work diligently to restructure our balance sheet," said Charles Skibo, Chairman and Chief Executive Officer for COLO.COM.
The company has hired Dresdner Kleinwort Wasserstein to help arrange post-bankruptcy funding, known as Debtor in Possession (DIP) financing. Such funding is made available on preferred terms to encourage lenders to provide the cash needed for companies to successfully reorganize.
"We're determined to re-emerge (from bankruptcy) as a going concern, and fully intend to do so," said Michael Pardun, COLO.COM's vice president of marketing. "Chapter 11 was our best option. It's allowing us the breathing space we need.
"This is something that's been in the works for a while," said Pardun. "We had an aggressive build plan last year."
COLO.COM is a privately held company with investment from leading venture capital firms, including Menlo Ventures, Accel Partners, Highland Capital, Athena Technology Ventures, Meritech Capital Partners and Investcorp International, Inc. Pardun said the company had raised a total of $500 million.
Last July COLO.COM filed registration forms with the Securities and Exchange Commission for an initial public offering that would have raised an additional $230 million. The filing was withdrawn in October. That was a key turning point for the company, according to Pardun.
"As the market started tanking, we made the decision to pull the public offering," he said. "We found ourselves in a situation where we had roughly 50 leases, and suddenly found the capital markets extremely unresponsive."
Pardun said that the company's liabilities were the issue, not its ability to execute. "I'm encouraged by the fact that we made our sales numbers in each of the last two months," he said.
At recent industry events, the consensus has been that leasing activity slowed considerably in late 2000, and tenants are harder to find. Pardun insisted that was not COLO.COM's experience..
"I've seen no slowdown in the marketplace," Pardun added. "We've found that demand has not slowed at all. The numbers keep looking good."
Nonetheless, the company cut staff a month ago and is in the process of trying to reduce its number of leases. Pardun said the company would continue to operate its 22 active data centers, and was weighing the future of five facilities that are largely complete but not yet open.
COLO.COM's customers include long distance carriers, competitive local exchange carriers (CLECs), Internet Service Providers (ISPs) and other Internet-based businesses. It has partnerships with Level 3 Communications, Yipes Communications, Telseon, AVCOM Technologies, and Space4Rent.
A third of COLO.COM's data center network is based in California, where the company operates facilities in Los Angeles, San Francisco, Emeryville, Irvine, San Diego, San Ramon and Santa Clara. Additional centers are located in Phoenix, Miami, Orlando, Chicago, New York, Dallas, Seattle, Las Vegas, St. Louis, Pittsburgh. Houston, Milwaukee, Vienna, Va., Oakbrook, Ill. and Medford, Mass.