May 20, 2002 -- Metromedia Fiber Network, Inc. said it will shed excess data center space, lay off staff and cut costs aggressively as it seeks to reorganize after filing for Chapter 11 protection this morning.
The bankruptcy itself was no surprise, as MFN had been warning for weeks of the possibility. But the impact of the filing and the resulting cost cutting is likely to be widely felt in the data center and Internet connectivity industry.
MFN said it has reached an agreement with its senior lenders to fund operations while it reorganizes, and said its customer services would continue uninterrupted. The filing includes "most of (MFN's) domestic subsidiaries," with the exception of Metromedia Fiber Network Government Services, which was formed last week to handle the company's government contracts.
The reorganization plan calls for "a substantial deleveraging" of MFN's balance sheet, to be accomplished through a combination of asset sales and cost cutting. The company said it will dispose of idle data centers, but didn't indicate which of its 24 data centers would be targeted.
Metromedia Fiber also said it would reject "burdensome" vendor contracts and cut staff, and "expects to quickly stabilize its financial status."
"First and foremost, I want to assure our customers that our top-notch service levels will not be compromised by the reorganization process," said John Gerdelman, president and chief executive officer of Metromedia Fiber Network. "Dedication to our customers and their businesses continues as a top priority.
"We believe that our core metro-fiber and data center businesses are some of the best assets in the telecommunications industry," Gerdelman added. "However, in growing the business we, along with others in the industry, outpaced the demand and, as a result, are overbuilt. We are committed to taking the painful but necessary steps to ensure stability and long term success for our company.
" Our objective is to move through Chapter 11 expeditiously and have the 'New MFN' emerge with a sound capital structure and operational base, fully positioned to take advantage of market opportunities," he added.
MFN has hired Impala Partners and UBS Warburg to advise it on restructuring and strategic alternatives. The company also announced that it has been delisted from the NASDAQ stock market.
Metromedia Fiber, based in White Plains, NY, operates more than 1 million square feet of usable colocation space, and has deployed 2.1 million fiber miles in 36 cities. It sells fiber, network services, managed services, web hosting and colocation through subsidiaries including AboveNet, PAIX.net and SiteSmith.