Nov. 14, 2001 -- Managed hosting provider Verado is in discussions with creditors about a prepackaged a Chapter 11 filing that would reduce the company's debt, the company reported in a filing with the Securities and Exchange Commission.
The Denver-based company has lost a total of $646 million and recently announced plans to shutter six of its eight Internet data centers. Verado has approximately $66 million in cash, enough to operate for about a year.
But yesterday the company projected it still faces "several years" of further losses.
To shore up the company's finances, Verado said it is in discussions with an "informal committee" of debtholders about a restructuring.
"Assuming these discussions are successfully concluded ... the company will seek confirmation of the negotiated plan through a voluntary Chapter 11 proceeding that would bind all of the company's creditors to the plan," Verado said in its SEC filing.
In any restructuring, the value of Verado's common stock would be "severely diluted," the company said. Shares of Verado closed at 16 cents yesterday on the NASDAQ market.
If it cannot reach an agreement with debtholders for a prepackaged bankruptcy, the company said it would then decide whether to seek Chapter 11 protection.
In third-quarter earnings announced yesterday, Verado took a $51.5 million charge reflecting its likely loss on the sale of the six facilities. The company also announced a $34.8 million charge to earnings reflecting lower revenue expectations for the data centers in Denver and Irvine, Calif. where it plans to consolidate its remaining customers.
According to its SEC filing, just 8 percent of Verado's "sellable square footage" is occupied. The company currently has 123 paying customers, of which 58 are housed in the six data centers scheduled for closure, located in Dallas, Houston, San Diego, Santa Clara, Portland and Salt Lake City .
Three of those facilities are scheduled to discontinue service by Dec. 1, with the remainder targeted to close by Feb. 1, 2002.
Verado was previously known as First World. During the past year, it has changed its name and shifted its focus and customer base from colocation to managed services. The company has also sought to raise its visibility with a marketing campaign that has included web advertising and radio spots on NPR's "All Things Considered."