Navisite Shares Trading for 30 Cents

These are brutal times for companies that are light on cash or facing borrowing challenges. The latest data center company taking its lumps is NaviSite (NAVI), whose shares traded for 25 cents late Tuesday before rebounding slightly to close at 30 cents. NaviSite offers managed hosting and application hosting from 15 data centers around the world, and just announced its entry into the dedicated server market. The company's shares traded at $3.70 in August, but have been sliding ever since. NAVI fell below $1 in early October, and hasn't found a bottom yet.

What's hurting the stock? NaviSite recently fell out of compliance with the financial covenants on its revolving credit line, but was able to renegotiate terms with its lender, swapping a slightly higher interest rate for more flexible financial covenants. The company said it is "confident that the new covenants will provide us with the additional required margin as we face the potential of a contracting economy for the foreseeable future."

Investors apparently would like to see NaviSite face that future with a little more liquidity. The company’s cash balance as of Sept. 30 was $3.3 million, down from the $4.9 million in the previous quarter. NaviSite's cash position has shrunk by $8 million curing the past year, in which it has made $31 million of acquisitions.

NaviSite added 72 new customers last quarter, and says it remains confident that revenues from operations and its existing cash reserve can find the business as it needs to purchase new servers. "Our capital equipment covenant remains consistent with our previous covenant at $14 million per year which we believe is sufficient to fund the success based capital equipment as we continue to grow," the company said.