Cogent buys time

Cogent Communications officials say they have bought themselves more time to turn the company around through debt reorganization and a new round of funding.

Cogent Communications officials say they have bought themselves more time to turn the company around through debt reorganization and a new round of funding.

The ISP says it now has long-term debt of $27 million, thanks to a new deal with Cisco. Cogent was carrying more than $380 million just six months ago and Cisco Capital $263 million. In exchange for the majority of that debt, Cisco now owns about 18% of the ISP. Cogent still owes $17 million to the equipment vendor, but its first payment is not due until 2006.

“Many companies that need to restructure debt turn to bankruptcy,” says Cogent CEO Dave Schaeffer. “But that’s a costly and traumatic process.”

By working with creditors, Cogent is fixing its immediate and long-term debt issues and bringing in $41 million from new investors, Schaeffer says.

The cash 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 will use the cash for operations, restructuring costs and also possible acquisition or merger opportunities, Schaeffer says.

Cogent acquired the majority of PSINet’s assets and competitive local exchange carrier Allied Riser’s assets last year, purchases that account for most of the company’s revenue growth.

Last year, Cogent reported $52 million in revenue and a net loss of $62.2 million. In the first quarter of this year, the ISP reported revenue of $14.2 million and a net loss of $14.9 million.

Although Schaeffer did not mention any potential acquisition targets, Cable & Wireless has stated its intent to leave the U.S. market. Sprint has announced plans to exit the Web hosting business. Cogent still operates three data centers through its PSINet acquisitions.

Cogent sells dedicated IP services in 30 metropolitan markets, and operates a national network. Cogent offers two services, including dedicated IP at 100M bit/sec or 1G bit/sec for $1,000 and $10,000 per month, respectively.