KPNQwest hangs up on rescue hopes
By Dan Sabbagh  (Filed: 24/05/2002)

The plight of KPNQwest, a Dutch business telecoms carrier, turned near-terminal yesterday after the company said it would file for bankruptcy in the wake of the resignation of its entire board.

Its collapse is the latest in a string of financial disasters to befall the sector this year, and comes just a month after the company first admitted that it was running short of money.

KPNQwest's decision comes after the failure of negotiations with its bankers, who were blocking access to the company's overdraft after the company issued a profits warning in April.

In a statement released yesterday, KPNQwest said its bankers had "insisted" on "certain asset sales in a timely manner" which it had not been able to conclude.

The company reiterated a warning that shares and, significantly, its bonds might have "no underlying value."

That suggests that the business will struggle to raise much more than the Eu300m that is owed in senior debt to the banks.

Trading in the company's shares was suspended by Euronext Amsterdam until further notice. Meanwhile, the bonds were being offered at just 2pc of their face value.

KPNQwest was originally a joint-venture between KPN of Holland and American carrier Qwest.

The parties, which remain 40pc and 47pc shareholders respectively, have both said that they will not provide further cash.

The group specialises in providing pan-European network services. Like Global Crossing, the American carrier that filed for Chapter 11 bankruptcy protection in January, it was dependent on one-time capacity sales to other operators.

Such sales have dried up dramatically in the past six months as the growth in internet traffic has stalled.

Last year KPNQwest reported Eu438m of capacity sales, more than half of the Eu810.1m in group revenues. Underlying profitability, while improving, was still poor at just Eu13.7m.

KPNQwest's collapse comes after that of Swiss rival Carrier1, which closed down earlier this year. Meanwhile, Energis is still trying to conclude a life-saving restructuring agreement that will allow it to escape £1.2 billion of debt.