Citing both the slowdown in the economy and in its own orders, Genuity cancelled a $2 billion bond offer, and said it would be relying on alternative funding sources, including money from Verizon, the telephone giant from which it was carved out last year.

Genuity said it needed time to “complete its assessment of the current slowdown in economic activity and IT spending,” according to a company press release. In addition, the explanation for the cancellation also referred to a Jan. 8 statement issued by the firm in which it reported that carrier and Internet Service Provider (ISP) orders declined 44 percent in the fourth quarter of 2000 versus the prior quarter.

The private (144a) deal, which was expected to hit the market as early as Tuesday, would have seen the firm borrow the money in five- and 10- year tranches via underwriters J.P. Morgan Chase and Salomon Smith Barney.

The firm’s debt is rated Baa2 by Moody’s Investors Service and triple-B-plus by Standard & Poor’s, putting it in the bottom tier of investment grade.

In addition, high-profile advertising for Genuity’s “Black Rocket” Internet platform product placed the firm squarely in the ranks of “new economy” firms, at least in terms of perception, making the would-be offering a barometer in many circles of the funding ability of the tech sector.

On the other hand, Genuity is hardly a go-it- alone startup firm of the kind usually associated with the new economy.

Spun off in June 2000 when regulators balked at the monopolistic impact of Bell Atlantic’s merger with GTE to form Verizon, the firm still retains equity links with the parent.

Verizon owns class B shares giving it a 9.5 percent stake in Genuity, according to Dan McCauley, Verizon’s manager of investor relations.

But provisions of the original spinoff specify that Verizon can reassume control of Genuity provided it abstains from providing long- distance service in certain areas already handled by Genuity. This would put the combination into compliance with Section 271 of the Federal Telecommunications Act, he said.

If that were to happen, Verizon could “change its equity position to class A shares, giving it a maximum 80 percent ownership stake and about 95 percent of voting power,” he added.

McCauley said he was unaware of any specific funding arrangements between Verizon and Genuity.

“I haven’t seen anything about it on our side,” he said, adding that a reassumption of Verizon control of Genuity would make things “simple.”

“They could just tap into our funds,” he said.

Genuity officials were unavailable for comment.

During its relatively short life, Genuity has seen its shares go from a high of $11.25 seen shortly after its IPO in June and a Dec. 26 low of $3.75. They closed Tuesday at $5.13.

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