SAN JOSE, Calif. – In another blow to financially troubled ExciteAtHome, two major cable companies said Friday they will terminate their partnerships with the high-speed Internet provider.
Meanwhile, an investment firm that had arranged emergency funding earlier this year said discussions are continuing on the repayment of the $50 million it had invested and later demanded returned.
Promethean Asset Management LLC said late Friday it has taken no action regarding the convertible notes. Promethean claims ExciteAtHome had misrepresented its financial woes.
"AtHome has taken concrete steps that may form the foundation for potentially constructive solutions to resolve the breach of terms of the notes," Promethean said in a statement.
Neither Promethean nor ExciteAtHome would comment further.
Meanwhile, Comcast Corp. and Cox Communications Inc. said they will exercise the right to exit from their agreements effective June 4, 2002.
The end of the deals does not mean the companies' cable modem customers will lose access. Rather, Comcast and Cox are likely to take over some operations themselves and find new partners for others.
"We want this to be a Cox-managed network," said Cox spokeswoman Laura Oberhelman. "We will have a greater amount of control over our network and assuming a lot of the responsibilities that sit with ExciteAtHome."
Steve Burke, president of Comcast Cable, said exercising the exit provision was in the best interest of customers and shareholders in light of reports of ExciteAtHome's financial condition.
Both Comcast and Cox also are in discussions with ExciteAtHome about forming new, more limited agreements.
"That being said, we will have 950,000 customers by year end and we need to ensure that they continue to be well served," Burke said.
But it remains to be seen whether Redwood City-based ExciteAtHome will survive into next year. The once high-flying company said in August that its independent auditors expressed doubt about its viability.
The latest crisis was the result of $100 million in convertible notes sold by ExciteAtHome in June to stave off another cash crunch. Promethean, which bought half the notes, later said ExciteAtHome misrepresented its financial condition and how long the money would last. On Monday, Promethean demanded a $50 million payment by Friday.
"We don't think there's merit in this call for the loan," Stephanie Xavier, an ExciteAtHome spokeswoman, said early Friday. "We're not paying the money today, and we're in active discussions with them about the call."
Though Promethean did not take action late Friday, the firm said it will monitor the situation closely "to determine what actions may be necessary to protect its rights," according to the statement.
Still, the $50 million is just a fraction of the $1 billion debt load carried by the company.
AT&T Corp., which is both a cable partner and controlling shareholder, has not made its intentions known. AT&T did not immediately return a call seeking comment. Some analysts believe AT&T or another investor may make a last-minute bailout.
ExciteAtHome announced Friday that it will hire an investment banking firm as a financial and restructuring adviser. The firm will assist the company in "exploring its options related to its financial position," according to a statement.
AT&T, Comcast and Cox are the three largest of the 21 cable systems that use the service. ExciteAtHome currently has 3.7 million subscribers nationwide, Xavier said.
The company, which also operates the Excite Web portal, has been hard hit by the downturn in Internet advertising and questionable management decisions.
ExciteAtHome provides e-mail, some content and the network backbone for cable modem users.
During the Internet boom, management sought to boost revenues by acquiring or merging with other companies, including the $6.7 billion Excite deal and $780 million for an online greeting card company.
Despite high hopes, the dot-coms did not pay off.
After losing $7.4 billion in fiscal 2000, ExciteAtHome said in April it needed to raise $75 million to $80 million to make it through 2001.
In addition to the $100 million in notes, ExciteAtHome raised another $85 million in June by restructuring the lease of its fiber-optic network from AT&T Corp. Even so, the company said in July that it needed more cash to stay in business in 2002.
The company's stock was down 19 percent, or 10 cents, to close at 42 cents a share Friday on the Nasdaq Stock Market. It was trading at more than $100 at the time of the Excite merger.