USinternetworking Files For Chapter 11, Gets Big Investment

Bain Capital Partners has agreed to invest up to $106 million in the company for USi to eliminate a large chunk of its debt. Under the agreement, Bain will invest an initial $81 million and an additional $25 million if the company achieves certain business conditions, the specifics of which were not disclosed. USi's filling for Chapter 11 bankruptcy protection Monday was part of the agreement with Bain, which will likely own USi if the company is able to reduce approximately $120 in debt.

In the third quarter ended Sept. 30, USi reported $31.7 million in revenue but suffered a net loss of $37.6 million or 27 cents a share. The company expects 2001 revenue of approximately $130 million, and hopes to emerge from bankruptcy this spring.

"Over the past year, we have made excellent progress in improving and strengthening the operational side of the business," says Andrew Stern, CEO of USi. "We have a strong business model, a large base of satisfied customers, and a team of committed employees, and I believe that USi will emerge from the reorganization plan a much stronger company."

USi, formed in 1998, was one of the pioneers of software hosting and became one of the most well-known ASPs in the market. During the height of the software hosting market, IT research firm Gartner Dataquest predicted the ASP market would surpass $10 billion in revenue by 2004. The recession last year, however, took a heavy toll on the industry as ASPs shut down or were acquired. So bad was the carnage that most software hosting companies ditched the ASP acronym in hopes of distancing themselves from the fallen industry. In fact, USi is one of the last major software hosting company to call itself an ASP.

USi's stock price is currently 22 cents; trading was halted Monday on the Nasdaq. The company's 52-week high is $5.25.