Cogent spruces up its balance sheet

Cogent last week announced that it has restructured its debt and raised $41 million in a new round of funding.

The ISP says its long-term debt now stands at $27 million, compared to more than $380 million just six months ago.

In exchange for the debt reduction Cisco Capital will take over partial ownership of the service provider, as will the newest investors. Apparently a large portion of Cogent’s debt was owed to Cisco for equipment.

The $41 million funding comes from a group of investors including Jerusalem Venture Partners, Oak Investment Partners, Worldview Technology Partners, Broadview Capital Partners, Boulder Ventures and Nassau Capital.

Cogent says it will use the new cash equity for operations and restructuring costs.

But it looks like the service provider still has tough financial days ahead. In the first quarter of 2003 the ISP reported revenue of $14.2 million and a net loss of $14.9 million. Last year Cogent reported $52 million in revenue and a net loss of $62.2 million.

While its balance sheet is looking better, it still seems difficult for IP providers to become profitable.

Cogent was once best known as a competitive local exchange carrier (CLEC), but since it acquired the majority of PSINet’s assets in 2002 the company now hangs its hat on the fact that it has a national IP backbone. But, the service provider still sells its services like many CLECs.

Cogent sells high-speed services to multi-tenant buildings in 30 metropolitan markets. It offers two flavors of service, either 100M bit/sec or 1G bit/sec for $1,000 and $10,000 per month, respectively.

The ISP’s national network runs over an OC-192 fiber optic backbone with “multiple” OC-48 metro fiber rings using Cisco gear.