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Exodus to file for Chapter 11

Exodus to file for Chapter 11

Beleaguered Web hosting company Exodus Communications is preparing to file for bankruptcy protection, according to a report in Tuesday's Wall Street Journal.

Naming "people familiar with the situation", The Journal said Exodus could file a petition under Chapter 11 of the US Bankruptcy Code as early as next week. Exodus had no response, saying it would not comment "on rumour and speculation".

The once high-flying firm has faced myriad problems this year as its dotcom customer base eroded and it began to shift into more complex managed hosting services. The company secured some big-name customers, such as American Airlines and Microsoft, but the firm, with 44 data centres worldwide, also has more than $US3.5 billion in debt.

Tuesday's news comes just two weeks after former CEO Ellen Hancock stepped down, and William Krause, an Exodus board member stepped in to head the company. Krause retired as chairman of 3Com in 1993 and is president of LWK Ventures, a Silicon Valley investment company.

At the time, analysts said the CEO shift was a move to appease Wall Street, which has sent Exodus' stock tumbling. Some figured Exodus was hoping to find a buyer.

According to the Wall Street Journal, a person familiar with the matter says Exodus has been talking with companies, including General Electric's GE Capital, EDS, Deutsche Bank and Credit Suisse Group's Credit Suisse First Boston, about debtor-in-possession financing, which would allow current management to run the company as it seeks to reorganise.

Andrew Schroepfer, president of Tier I Research, told the Journal a creditor committee is being formed by some of the larger bondholders.


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