MFN Appears Done

The news from Metromedia Fiber Network this morning is grim indeed. MFN has just $37 million in cash remaining, and has "deferred" a $30 million interest payment due to Verizon last Friday. The company has $3.3 billion in debt, giving it a cash-to-debt ratio of just over 1 percent. Yep, MFN owes nearly 100 times as much money as it has. The bankruptcy filing appears to be a fait accompli; once a company publicly says it may file Chapter 11, the game is essentially over.

Any smart lender with a genuine interest in MFN would seek the preferred status of a post-bankruptcy debtor-in-possession loan. No one wants to be the last person to give a company money before they file Chapter 11.

In gaining its last round of funding, MFN was able to convince some of its existing stakeholders to pony up. But it required protracted negotiations in which almost every piece of the package relied upon another loan. Logic suggests that as its cash has dwindled in recent weeks, MFN has no doubt had further discussions with those stakeholders, apparently without success.

Meanwhile, an analysis from the Light Reading web site raises hard questions about Level 3's viability, predicting a "near term financing crisis" for the provider.