As part of its ongoing fiscal fitness plan, Network Access Solutions [NASC] finessed a deal with SBC Communications [SBC] that relieves the Herndon, Va.-based DSL systems provider of a $75 million debt.

NAS will give 400 unused central offices, which it owns in the southern and western United States, to SBC in exchange for SBC's cancellation of the debt. SBC acquired that debt last March when it purchased 2.6 million shares of NAS preferred stock, then valued at $31 per share. The Series B 7-percent preferred stock will be converted to common stock worth about $2.3 million.

On Friday, NAS was trading at 87 cents per share. It has traded as high as $40 in the past year.

Last November, NAS laid off 145 employees as part of a belt-tightening plan designed to slow down the company's cash-burn rate. The arrangement with SBC fits in with NAS' long-term plan to eventually turn a profit, said NAS spokeswoman Debra Arrington.

"If you look at the pattern of what we've been doing, we've been totally focused on profitability," Arrington said. She said NAS' "game plan" is to reduce cash requirements, trim its work force and balance its books in keeping with the company's stated goal of getting into black ink by early 2003.

The deal looks like a winner for SBC as well, said Cahners In-Stat ISP strategies analyst Daryl Schoolar.

"It's good for SBC because they get more COs up online for DSL. It looks like they are putting their money where their mouth is when it comes to being committed to DSL rollout," said Schoolar.

The Bottom Line

This looks like a win-win deal for both companies. SBC can more aggressively pursue its high-speed ISP program, and NAS gets to join a very select club of troubled DSL systems providers that have actually been able to sell off some surplus assets at less than fire-sale prices.

Now, if NAS can just get its hands on the additional $70 million it says it needs before the third quarter of this year, maybe it can make a financial turnaround.