Corvis Corp. of Columbia said yesterday that it has raised $225 million from the sale of senior unsecured convertible notes to several institutional investors as the fiber-optic company seeks to expand its telecommunications business.
The money will be used for general purposes and "strategic acquisitions," said Andrew G. Backman, Corvis' vice president of investor and public relations.
Corvis hopes to acquire businesses for Broadwing Communications Services, a Dallas carrier it bought in June as it sought to diversify.
Broadwing, which carries voice, video and Internet traffic on its 19,000-mile optical network, is now the biggest part of Corvis' business. The financing is seen as a sign of confidence for Corvis, an optical equipment maker that went public in July 2000 with high expectations but has suffered along with the rest of the technology sector during the past four years.
"We're pleased with the progress we've made since [the June purchase]," Backman said. "Being able to raise money in this market is a vote of confidence."
Vik Grover, an analyst with Needham & Co. in New York, agreed. "Not everyone has been raising $300 million, that's a good chunk of change," he said. "That shows a lot of confidence. ... The industry is still suffering from overcapacity and too much competition. Consolidation is one way to deal with that."
The $225 million was raised through the sale of two-year notes that Corvis issued to private investors. Investors will be repaid in quarterly payments of either cash or stock at an annual interest rate of 5 percent, according to Corvis. Corvis has an option to raise another $75 million after nine months. The notes are convertible, at the investors' option at any time, into Corvis common stock at a fixed conversion price of $5.75 per share, subject to anti-dilution adjustments.
Corvis shares closed at $2.46 yesterday, up 9 cents on the Nasdaq stock market. Shares are up 45 percent this year.
Grover, the Needham analyst, said one company Corvis may be targeting for a takeover is Allegiance Telecom Inc., also in Dallas, which provides telecommunications services to businesses. The company put itself up for sale and accepted bids through yesterday, said Allegiance spokesman Jerry Ostergaard. Allegiance expects to choose a buyer by Feb. 19.
Though Allegiance is not Corvis' only option, acquiring such a company would be highly beneficial to Corvis, said Grover.
"There are other candidates they can acquire, but the consolidation game is heating up in this industry," Grover said.
Corvis and Allegiance officials declined to comment on any possible negotiations between the two.
Corvis once had as many as 1,600 employees and its stock traded for more than $100 a share in 2000. But when the technology sector faded, Corvis saw its shares fall to as low as 47 cents a share in March, eventually knocking it off the Nasdaq national market. Corvis shares began trading again on the national market in September.
Officials announced in September that they would cut another 200 employees in an attempt to reduce costs. Corvis has about 200 workers while Broadwing has about 1,000.