Magazine article American Banker

CyberCash in Ch. 11;buyer Still Has Hopes

Magazine article American Banker

CyberCash in Ch. 11;buyer Still Has Hopes

Article excerpt

CyberCash Inc., the electronic payments company that seven years ago was flush with money and pioneering expectations, on Friday became another casualty of the dot-com crash, with the firm declaring bankrupcty.

CyberCash, which offers gateway services for Internet transactions, was supposed to be acquired by Network 1, which provides settlement services for those transactions.

That deal, a stock swap announced in December, fell apart Friday when CyberCash said it could not scrounge the money it needed to pay closing costs, fees to investment bankers, and severance fees for layoffs. It also owes $6 million to $7 million to creditors. Nasdaq halted trading of CyberCash stock on Friday.

The bankruptcy filing capped a rapid series of setbacks for CyberCash, which has been plagued by unfavorable capital markets, dwindling cash reserves, and the resignation last month of its prominent and deep-pocketed founder, William N. Melton, who disputed a move by two major investors to dilute warrants in the company. Even before running out of money, Cybercash, of Reston, Va., had had to change its business model quickly, reinventing itself from a consumer Internet payments firm to one that primarily targeted merchants.

CyberCash said it had approached more than 40 potential investors about putting in the money to thwart bankruptcy, but none had bitten.

"Given the markets, we were unable to raise sufficient capital to get the closing to close," said John Karnes, executive vice president and chief financial officer of CyberCash. "Right now, there is no appetite for investment in Internet companies." CyberCash filed for Chapter 11 bankruptcy in Delaware, and arranged a new plan for Network 1 to acquire its assets from the court.

Network 1, a private company in McLean, Va., had hoped to have CyberCash under its wing by April, but now its $9 million bid is subject to the court's approval, and may be trumped by higher bids from other firms. …

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