Message Font: Serif | Sans-Serif
No. of Recommendations: 10
By: sjbny $$$$
Reply To: None Thursday, 2 Aug 2001 at 1:38 AM EDT
Post # of 16569

Now for the good stuff...
Let's see they originally asked for:
$350 mil for completion of network
Commitments to date:
Citigroup $62.5 mil
Unnamed sources $180 mil
Balance remaining $107.5 mil

We'll get back to that.

Now it appears they are seeking/have been negotiating for
$550 mil.

It is a safe bet that would explain the repeated dalays.

Now if we go back (with the help of some posters here), I read a report within the past month by an analyst (yes we all hate them, except myself*((*thanks NPR)) who stated that they should ask for $500 mil "just to be safe". That was, as they say in poker, a tell.
Then you throw in all the other lemmings of analysts who were truly in the dark with respect to some financial outcome for mfnx. This is hardball by mfnx (and their B.O.D. and exec's). Amazing display of clout with their "non-disclosure" negotiations.
Back to the #'s.
They now need $107.5 mil in financing to complete that part of the deal. Now the deal has evolved to add another $200 mil in V.F., which is now being required by the funders.
Here comes the nugget 'o gold.
Many here today have bandied about what that actually is, mostly incorrect. (also realized, that with Grover's word for word plagiary of my post from last week, I tend to post in terms too "inside", so I will elaborate more)(of which I mentioned V.F. and factoring as some of the many options of funding for mfnx)
Vendor financing. Yes, mfnx is a vendor. But NOT in the dynamics of this context.
Vendor financing means the equipment companies that manufacture the goods mfnx buys from and installs "in the ground" for their network buildout will essentially give mfnx terms/credit for equipment mfnx will purchase in the future. (of at least $200 mil)
Basically the funders are saying: if we lend you the $$$ to buildout your ambitious network, we want as close to a guarantee as we reasonably can that you will complete this buildout and get to the point where you are realizing the revenues end of the business. They want to assure that mfnx reaches the maturity faze of the business cycle where mfnx' expenditures drop off dramatically and are left with the final segment of mfnx' business plan, in which they become a (metro monopolistic) high bandwith (Tera-bit) servicde provider that leases in a revolutionary way it's bandwith capacity (fixed cost, unlimited usage capacity) to EVERY MAJOR COMMERCIAL/BUSINESS ENTITY IN EVERY MAJOR URBAN MARKET ON THE FACE OF THE EARTH. (o.k., maybe a little too dramatic, but correct none the less).
People on every tangent to this roundtable will be making alot of money on mfnx.
(BTW, Cisco has been giving out $100 mil vendor financed deals like dentists give out sugar free lolli-pops to kids, recently. They have only admitted to a few of them recently, to START appearing fiscally responsible)
So, mfnx needs only $107.5 mil in equity for the $$ side of this equation and $200 mil agreement from a mix of one or more of their vendors to seal the deal. For the vendors of mfnx, in a slowing market we are currently experiencing, it's like guaranteed sales. All they have to do is decide in what Q's they want to post the #'s for. That's some nice window dressing for them as they turn an ugly Q into a successful one. (Miracle huh.).
The cash is no problem except for the terms, which mfnx' execs are squeezing like those commercials for lendingtree, where the homeowners have all these bankers in their house trying to peddle their refi mortgages, and they laugh at them and say, "not good enough, NEXT!!"
The insistence of the $200 mill in V. F. by the funders leads me to believe that, since they are privy to all the books, they want to ensure that mfnx will be able to purchase/pay/install/collect fees for all their orders currently booked. (and future orders)
It is a simple and all too common problem in the business community. A credit crunch.
They don't have enough money to purchase all the equipment they need to fulfill the orders they have, and thus risk losing those orders, or going bust before they finish, thus realizing no gains financially.
Same problem with Bjorn Borg, that tennis star. He had soo many orders for his sportswear line that he simply could not afford to produce all of it, and went out of business. Yes, he went out of business because he had TOO MANY orders for product. But see, he was a great tennis player but a stupid business person. That is the difference with mfnx. These are some of the shrewdest cookies on the planet. It doesn't hurt that their clout extends into the billions of dollars on the street. (BTW rule # 1, never NEVER use your own money, get someone else to fund your dreams).
So, the funders know they have big $$ in backlog orders and want to make sure that their suppliers will not cut them off sometime in the future before mfnx is done building it's network. As in the $107.5 mill $$$ part, the $200 mil V.F. part, they just need to hammer out the last nickel in the cost of it all.
If Kluge would just sign a PG, this whole drama would have been over with a long time ago, but refer to above rule #1.
Back to the tangent-roundtable referrence:
MM's making a killing on using these delayed negotiations to bring this up and down like a yoyo until word of a completion is announced. The insts. are making a killing doing the same, AND loading up at cheep levels, insiders loading up, daytraders makin' a killin', and us longs, with a nice steady slow (sic) rise in our portfolios.
That $200 mil insistence by the funders is a nugget o' gold, tipping the hand of the funders to the fact that they want to ensure that mfnx can afford to comply with all the orders they have. Pretty shrewd of Tanzi and gang.

Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.