October 4, 2002
Cisco Systems Inc. (Nasdaq: CSCO) has once again been stung by a carrier to which it provided financing to buy its optical networking and telecom gear.
This time the culprit is Waltham, Mass.-based CTC Communications Inc., a facilities-based CLEC. CTC filed for Chapter 11 bankruptcy protection this week and announced it would fire 300 employees in order to help get its expenses under control.
As of March 25, 2002, CTC employed 705 people, according to the company's Securities and Exchange Commission (SEC) filings.
CTC's bankruptcy filings state that it owes Cisco Systems Capital Corp., the financing arm of Cisco, $57.9 million. The debt is categorized as a "capital lease obligation." The carrier's filings also state that, as of July 31, 2002, it had assets of about $307 million and liabilities of about $394 million.
Carl Redfield, Cisco's senior VP of manufacturing and logistics, has served on CTC's board since January 1999.
In 2001, CTC bought about $38 million worth of equipment from Cisco and, in a recent SEC filing, stated that it intends to buy just as much gear from Cisco in 2002. Cisco also added $25 million to CTC's $225 million senior secured credit facility with Toronto Dominion Bank.
For Cisco, CTC's bankruptcy may be relatively inconsequential when it comes to the earnings statement. However, the bankruptcy extends Cisco's losing streak when it comes to funding the right business plans in the service provider market (see Cisco-Backed Cambrian Is Bankrupt and Cisco's Learning Experience).
— Phil Harvey, Senior Editor, Light Reading
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