PSINet sells business unit

Struggling ISP PSINet Tuesday said it will sell its e-commerce data-communications unit, PSINet Transaction Solutions, for $300 million.

PSINet said in a statement that it is selling the business unit to GTCR Golder Rauner LLC to raise cash. PSINet's cash requirements under its business plan for fiscal 2001 are greater than its capital resources, so the Ashburn, Va., company has decided to explore selling certain assets and reducing certain capital expenditures, the company said.

In addition to the sale of its PSINet Transaction Solutions unit, PSINet will likely restructure or "negotiate some of its obligations to third parties" that if not addressed could cause the company to default on some of its debt, the company said. PSINet believes the sale of the business unit will give it more financial flexibility going forward, the company said.

PSINet will record the sale of PSINet Transaction Solutions as a $300 million loss, the company said. PSINet and GTCR Golder Rauner expect to complete the sale of PSI Transaction Solutions by April 30, 2001.

PSINet also announced that it had completed the sale of PSINet Global Solutions, part of its consulting unit, in a separate deal. The company did not disclose terms of the deal.

Adding to PSINet's woes, a federal judge in Virginia has allowed a lawsuit to move forward against the company that alleges securities fraud, The Washington Post reported Tuesday. The suit alleges the company made false statements about its cash flow, failed to disclose problems with its business plans and was reckless in its $2 billion acquisition of Internet consulting firm Metamor Worldwide, according to the Post story. PSINet had no plans to integrate Metamor into its operations, the suit alleges.

As of March 2, 2001, PSINet had $300 million of cash, cash equivalents, short-term investments and marketable securities, the company said. The company reported in November a $1.4 billion loss in its third fiscal quarter, ended Sept. 30.

Shares of PSINet closed at $1 a share on Monday. The company's 52-week high is $60.93.

PSINet is at www.psinet.com.

The IDG News Service is a Network World affiliate.