Creditor Calls on ExciteAtHome

Aug 27 2001

Ailing Internet portal and high-speed access provider ExciteAtHome denied that it misrepresented its financial position to two note holders who are now demanding that the company return $50 million by Friday.

However, in a written statement, Excite admitted that if it were forced to repay the notes "it would have a materially adverse impact on the company’s liquidity and its ability to fund its operations."

The news sent shares of ExciteAtHome plunging 22 percent, or 11 cents, to close at 39 cents in heavy trading of more than 22 million shares on the Nasdaq. Excite is controlled by AT&T.

The issue stems from $100 million in financing that Excite received in June when it sold convertible notes – essentially, five-year bonds that can be exchanged for stock - to two investment funds managed by Promethean Investment Group.

Promethean confirmed that it notified Excite that it was in breach of the terms of the purchase agreement for the notes, which are due in 2006.

"Promethean carefully considered the underlying facts which form the basis for the breach of the agreement, and is highly confident about the position it has taken," the investment firm said in a statement.

Promethean is alleging that Excite breached some unspecified representations that it made when the latter company issued the notes, Excite said in a statement.

"ExciteAtHome disputes both the assertion of breach of representations and the contention that the notes may now be declared due and payable," Excite said.

Promethean said it has told Excite that it is willing to discuss "options and ways in which the terms of the agreement could be honored."

The news is the latest blow to Redwood City, Calif.-based Excite. Last week, Excite revealed that it had fired its auditor, Ernst & Young, a day after the auditor expressed doubt about the company’s ability to continue as a "going concern." Excite, which hired PriceWaterhouseCoopers to replace Ernst & Young, said the switch in accounting firms had been planned for some time and was not related to the going-concern warning.

Analysts are increasingly questioning the future of debt-laden Excite, which runs a high-speed Internet access service, as well as a money-losing Internet portal that has been hurt by the slump in advertising.