PSINet clings to name on stadium

Ailing Web company sells assets, not right to name Ravens' nest

March 15, 2001|By Andrew Ratner | Andrew Ratner,SUN STAFF

PSINet Inc., the Internet company that bought naming rights to Baltimore's football stadium in 1999 when the Ravens were desperate for cash, now finds itself in even more dire straits.

The company, based in Ashburn, Va., announced the sale Tuesday of a profitable credit-card transaction business for $300 million and a systems maintenance company for an undisclosed price.

In spite of those deals, the company acknowledges that it will need to renegotiate or restructure its debt to survive. The company said it has about $300 million in cash reserves, but has been spending about $125 million a month.

"The long-term prognosis is that there is no long-term prognosis," said James Henry, an analyst with Bear, Stearns & Co. Inc. in New York. The sales, he said, "buy them time, nothing more."

The Baltimore region became acquainted with PSINet in January 1999, when it struck a 20-year, $105 million marketing deal with the Ravens. Under the arrangement, the $223 million publicly financed stadium at Camden Yards was named for the company.

At the time, PSINet was just beginning to fly. Its stock price nearly quadrupled - from $16 a share that winter to about $60 a year ago. But some stock analysts said it acquired too many businesses too fast, and its fortunes have sunk with the rest of the Internet field. Its stock closed yesterday at 69 cents a share, down 6 cents, on the Nasdaq stock market.

By the end of next month, the company hopes to close on its sale of PSINet Transactions Solutions, which manages credit-card purchases, to an investment group led by GTCR Golder Rauner, a private venture firm.

PSINet also announced Tuesday the sale of PSINet Global Solutions, which provides computer system maintenance, for an undisclosed price to SignalTree of Irvine, Calif.

The company also warned this week in a filing with the Securities and Exchange Commission:

"Despite the anticipated sale ... and other efforts under way, the company believes it is likely that it will need to restructure or renegotiate some of its obligations to third parties, certain of which, if not resolved, could result in defaults."

Sales do little

The sales didn't do much to brighten Wall Street's view, especially in a period of tight capital lending and fragile confidence in e-commerce.

"Maybe they can get another deal. They still have other Web-hosting centers and 100,000 customers," said David Takata, who follows the company for Gerard Klauer Mattison & Co. Inc., a New York investment banking firm. "They've got to raise capital to run the business."

Regarding the stadium, the Ravens are mum about whether PSINet's tenuous future presages a possible name change.

"It doesn't change our current status," said Kevin Byrne, vice president of public relations for the Ravens.

PSINet said it has no plans to shop the stadium name as another opportunity to raise cash.

"Nothing's changed. It's business as usual," said Flo Bryan, vice president for sports marketing and communications for PSINet. "We look forward to carrying on with the Ravens into next season and beyond."

The price of putting PSINet's purple-lighted name on the stadium has already been paid to the Ravens, said David Cope, a former team executive who was instrumental in arranging the marketing partnership.

PSINet paid the Ravens $11.8 million in January 1999. The Ravens agreed to that sum upfront rather than being paid $1 million for each of 20 years, as originally planned, said Cope, who now runs Gilco Sports and Entertainment.

If PSINet defaulted on the rest of the deal, which includes sponsoring and maintaining the team's official Internet site and the company's use of a skybox, the team could conceivably work out a deal to resell the naming rights, he said.

Another possibility: If PSINet is bought by another company, the buyer's name might go on the Baltimore stadium. That occurred in Philadelphia when the name of a new arena there was changed from the CoreStates Center to the First Union Center after First Union Corp. merged with CoreStates Financial Corp.

The Maryland Stadium Authority has approval rights over the signage at the football stadium, but not the actual name.

Ravens struggling

When the Ravens bought the naming rights from the state of Maryland for $10 million and sold them to PSINet, the team was criticized for selling to an out-of-state company with a peculiar name.

At the time, the Ravens were struggling under their own debt related to their move from Cleveland to Baltimore in 1996. But in December 1999, Ravens majority owner Art Modell sold a 49 percent stake in the team to Anne Arundel County businessman Stephen J. Bisciotti for $275 million, and an option to purchase the rest for $325 million in four to six years.

The stadium - and the stadium naming rights - are believed to have increased in value with the team's Super Bowl victory.

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