NEW YORK - PSINet Inc., the former high-flying Internet service provider that filed for Chapter 11 protection last year after a string of acquisitions, will be liquidated now that it has obtained approval from a bankruptcy judge.
U.S. Bankruptcy Judge Robert Gerber approved a liquidation that will return about 10 cents on the dollar to PSINet's bondholders and general unsecured creditors. Those creditors are owed more than $4 billion.
"The plan is feasible," Gerber said in court papers filed yesterday. "The debtors have demonstrated that, on and after the effective date, they will have the ability to meet their financial obligations under the plan and liquidate their remaining assets in the ordinary course."
PSINet, founded in 1989 and based in Ashburn, Va., has no continuing U.S. operations. Most of PSINet's U.S. businesses were acquired by Cogent Communications Group Inc. Some of PSINet's European subsidiaries that did not join the bankruptcy filing in May of last year are continuing in business.
PSINet has about $472 million in cash with which to pay creditors from the sale of assets, court papers say. After paying priority and administrative claims, about $431 million remains to pay unsecured creditors, according to court papers.
The company's shares will be canceled under the plan, and equity shareholders will not get any money.
A PSINet spokesman, Jason Thompson, declined to comment yesterday on the bankruptcy court approval.
From 1998 to 2000, PSINet embarked on an aggressive acquisition spree, buying 74 Internet service providers as it sought to become the biggest provider of Internet services for businesses.
"At the time of the Chapter 11 filing, PSINet and its subsidiaries together constituted one of the world's leading providers of Internet access on a commercial basis," PSINet said in court papers.
One of the largest acquisitions, that of the Internet consulting company Metamor Worldwide Inc. in 2000, is not part of the liquidation plan. In a separate deal being overseen by the bankruptcy court, PSINet sold Metamor to Ciber Inc. for $37.5 million in September.
PSINet paid about $1.65 billion in stock to acquire Metamor at a time when PSINet shares traded for more than $40. PSINet's shares reached a high of $59.81 on March 8, 2000.
PSINet is one of several companies to go bankrupt after spending millions to acquire the naming rights for a major league sports stadium. PSINet signed a 20-year, $105 million contract with the Baltimore Ravens.
PSINet and the Ravens agreed to cancel the contract this spring so that the franchise could find a new stadium sponsor.