Mpower Holding Corp., a New York-based broadband provider, anticipates emerging from bankruptcy court at the end of the month, but the company could face a cash crunch later this year if it cannot lure investors.
The U.S. Bankruptcy Court for the District of Delaware has approved the company’s pre-negotiated plan to eradicate nearly 90 percent of its debt, leaving Mpower with $51 million in notes due in 2004. But in contrast to other reorganization plans bankrupt carriers have forged this year, Mpower has failed to raise additional equity or debt.
Mpower said in a May regulatory filing the company estimated it had money to fund operations through the first quarter of 2003. The Rochester, N.Y.-based provider continues to meet with potential equity investors, but has “nothing to report as of yet,” said Mpower spokeswoman Michele Sadwick.
Mpower provides voice and data services to 122,000 customers in 27 markets, mostly consisting of small to medium-sized businesses. Approximately 10 percent of the provider’s customers are residential subscribers.
Under the reorganization plan Mpower will pay senior noteholders $19 million in cash, eliminating $583.4 million in debt and preferred stock.
Noteholders also will receive 85 percent of common stock while preferred and common stockholders respectively will receive 13.5 percent and 1.5 percent of the common stock. Mpower trades on the OTC bulletin board under the symbol MPWRQ.
“We are in a much better position financially and much more attractive for new investors,” Sadwick said.
Last year Mpower posted an EBITDA (earnings before interest, taxes, depreciation and amortization) loss of $155.3 million off $195.7 million in revenue.
Mpower had $105 million in cash, cash equivalents and investments in the first quarter. But the company’s quarterly SG&A costs alone totaled $42.6 million. Sadwick declined to reveal how much cash the company has on hand. Mpower will make that information public when it reports its second quarter results in the second week of August.
The company, which employs 1,700 people, continues to bleed losses. Mpower posted a first quarter EBITDA loss of $28.9 million, down from a $30.4 million loss in the prior quarter.
