Features

E-mail provider Critical Path receives $95 million boost

By Michael Liedtke, AP Business Writer
Monday November 12, 2001

Investment will keep company, $65 million in debt, afloat 

 

AN FRANCISCO – Embattled e-mail provider Critical Path Inc. announced a $95 million investment Friday that management said will keep the company afloat until it becomes profitable. 

The investment, made by a group led by General Atlantic Partners, consists of a $30 million cash infusion and the retirement of $65 million in debt.  

The deal gives Critical Path more than $90 million in cash assets and reduces its outstanding debt to $37 million, down from $300 million six months ago. 

The investors will receive convertible preferred stock and warrants to purchase 2.5 million shares of Critical Path’s common stock. The company didn’t disclose the conversion price of the investment. 

Critical Path Interim CEO William McGlashan Jr. said the investment completes a reorganization launched earlier this year after the San Francisco-based company acknowledged that some of its former employees had fabricated sales last year. 

The accounting scandal devastated the company’s once high-flying stock and raised questions about whether the business would survive the crisis. 

Critical Path’s shares surged 99 cents, or 88 percent, on Friday’s news to close at $2.12 on the Nasdaq Stock Exchange. The stock peaked at $134.88 in 1999. 

As part of its overhaul, Critical Path has laid off more than 400 workers to pare its expenses by $70 million annually. McGlashan said running the business now requires about $30 million quarterly, slightly more than the company’s projected quarterly revenue of about $27 million. The company lost $346.4 million on revenue of $93.4 million through the first nine months of the year. 

“Cash is not an issue for us anymore,” McGlashan said. 

Backed by the new investment, Critical Path is hoping to attract more corporate customers previously uncertain about the company’s chances for survival. 

Critical Path also is trying to move past the accounting scandal. On Thursday, the company agreed to pay $17.5 million to settle 55 shareholder suits alleging misconduct in the accounting scandal. Critical Path also will issue warrants for 850,000 shares of its common stock priced at $10 per share. 

The company’s accounting imbroglio remains under investigation by the Securities and Exchange Commission. Critical Path is cooperating with the inquiry.