WCAS Takes Stake in SAVVIS

Highly respected investment firm picks up funding for the beleaguered backbone provider after Bridge buckled. But is $20 million enough to stabilize SAVVIS?

by Roy Mark of dc.nternet.com [February 21, 2001]

Welsh, Carson, Anderson & Stowe is investing $20 million in SAVVIS Communications Corp. as the first step in SAVVIS' strategy to raise additional funding to support its corporate growth objectives.

Late last week, Bridge Information Systems filed for Chapter 11 bankruptcy protection in an attempt to reshuffle its debt load. As the largest shareholder in SAVVIS, the Virginia-based backbone provider was sent scrambling for funds

The WCAS investment is a 16 percent stake in SAVVIS. The financier is also rumored to be negotiating terms to acquire Bridge Info Systems as it is also one of the largest stockholders in the struggling firm.

Performance note
"SAVVIS has met or exceeded financial analysts' consensus expectations for every quarter reported since our IPO a year ago. In today's demanding financial markets, this is notable performance," said Rob McCormick, chairman and chief executive officer of SAVVIS.

"We are extremely excited about WCAS's endorsement of our business plan and are confident that our capital funding needs will be met in the near term. Overall, we fully expect 2001 will be a year of breakout performance for SAVVIS."

In the purchase agreement, entities controlled by WCAS have agreed to purchase $20 million of SAVVIS' 10 percent Convertible Secured Notes due 2006, convertible into common stock at $1 5/16ths per share, which was the closing bid price of SAVVIS common stock on Feb. 15, 2001.

Net history
In 1999, Bridge acquired SAVVIS, an Internet access provider that offers service in 40 countries, and early last year, it spun off SAVVIS in a public offering. Bridge retains a 46 percent interest in SAVVIS and represented approximately 80 percent of SAVVIS' revenue for the nine- period ending Sept. 30.

The Chapter 11 filing will allow the New York-based Bridge to continue operations while it puts together a reorganization plan and seeks outside investors.

Bridge, which has $800 million in bank debt, has been experiencing financial problems for more than a year and had proposed a restructuring plan to it creditors. Highland, which holds 8 percent of the Bridge debt, refused to sign off on the deal. If Bridge had been forced into Chapter 7 bankruptcy, it would have been forced to liquidate.

On Oct. 27 SAVVIS announced that it had been advised that Bridge had notified its lenders that it had failed to satisfy the minimum EBITDA requirement of its bank credit agreement for the third quarter of 2000. SAVVIS also announced at that time that Bridge had informed its lenders that it was in discussions with its shareholders regarding an equity investment in Bridge and intended to negotiate a concurrent revision of their credit agreement to restore the company to contract compliance.

Earlier this month, Rob McCormick, chairman and chief executive officer of SAVVIS said, "Bridge has said that it will continue to deliver its services to its customers, which currently number over 4700 financial institutions worldwide. Since most of Bridge's market data is delivered across the SAVVIS network, we expect Bridge to continue to fulfill its obligations to SAVVIS."

Bridge, together with its principal operating units, Bridge Information Systems, Telerate, Inc., eBRIDGE, Bridge Trading, and BridgeNews, is the largest provider of financial information and related services in North America.

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