KPNQwest in looming liquidation scenario
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Time is running out for bankrupt pan-European carrier KPNQwest NV. Yesterday it admitted that it is struggling to find a buyer for the company as a whole, and advised its customers to make contingency plans with other network providers, increasing speculation that it will be forced to shut down its network in the next few days.
The Hoofddorp, Netherlands-based company's administrators and management said that though negotiations will continue, it is unlikely to find a buyer for the company as a whole in the next month. Even though several telcos including AT&T are thought to have expressed an interest in acquiring the company, no formal bids have been made.
It did claim to be close to finding a buyer for some of its non-core assets, which would ensure that its core network remained operational for the immediate future, and said it had held advanced discussions with parties interested in purchasing its Central European business on a stand-alone basis as a going concern.
Should it not be able to close a deal, its customers will have to find alternative carriers, thereby slashing the value of the assets remaining. This option, which would be a disaster for its creditors, looks increasingly likely, and KPNQwest said it is assisting customers with their contingency plans.
The company's spectacular fall from grace has happened at breakneck speed. After raising 1bn euros ($940m) through an IPO in November 1999, its market valuation shot up to 42bn euros ($39.4bn) in February the following year. Despite being able to report EBITDA profit and the acquisition of the Ebone and Central Europe businesses of Global TeleSystems Inc last year, its business began to unravel after the collapse of Global Crossing in February this year.
It admitted that 120m euros ($105.6m) of recorded revenue last year (15% of the total) came from sales of optical capacity to carriers from which it had purchased capacity assets. In addition, one of its parents, Qwest, became the subject of an investigation for its role in possibly fraudulent transactions involving IRUs, some of which could have involved KPNQwest. It also transpired that much of its revenue came from its parents, both of which were making cutbacks.
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