Tough times force debt-for-equity swaps
Published: 20 Jun 2003 10:03 BST
Cisco Systems has taken an 18 percent stake in the financially ailing Web provider Cogent Communications.
The deal, made public on Thursday in Securities and Exchange Commission filings, settles a $263m (£157m) debt that Cogent amassed as it built a nationwide fibre-optic broadband network almost entirely out of Cisco gear. Cogent still sells Web access to large businesses and other Web service providers.
The deal is another sign of the extraordinary measures that companies like Cisco are taking as financially unstable customers crumble under the ongoing dire economic conditions. Sprint Communications, for example, is under a similar financial strain to buy its financially ailing affiliates that resell Sprint phone services.
Representatives from Cogent and Cisco were unavailable for comment late Thursday.
The arrangement is part of Cogent's overall strategy that's erased all but $27 million of its overall $380 million debt during the past six months.
On Wednesday, Cogent also announced it received $41 million in cash from six different investment firms, including Oak Investment Partners and Worldview Technology Partners.
"Cogent remains confident and focused in our ability to continue to provide value to customers," said Dave Schaeffer, Cogent Communications chief executive.
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