24 May 2002 -- Amsterdam-based data services provider KPNQwest NV has filed for bankruptcy protection from its creditors following the resignation of its supervisory board. Its banks are holding most of its remaining cash and are demanding it sell some of its assets as a prerequisite to any standstill agreement. Court-appointed administrators have stepped in and are looking to continue talks with potential investors.
KPNQwest market value has collapsed from Euro40bn to Euro21m in two years through debt from building its fibre-optic networks. The company reiterated that its debt and equity securities are probably now worthless.
Its largest shareholders and main customers - US-based Qwest Communications and Holland's KPN, which each own about 40% - will do little to rescue the joint venture they started in 1999. Qwest said on 15 May that it has no obligation to continue funding KPNQwest, which represents just USD10m in quarterly revenue for Qwest. However, Qwest could face a charge of up to USD706m. Last quarter, it took a charge of USD462m to write down the carrying value of its investment.
KPNQwest said it was in talks with key shareholders and banks to find funding sources, but that it had so far failed to sell assets which had been targeted for disposal.
As many as 10 groups are interested in buying all or parts of the company. Most had already approached the company in April, it says. The Financial Times reported that KPNQwest has held takeover talks with the UK's Cable & Wireless plc and BT Group plc as well as AT&T Corp and Verizon Communications of the US and Spain's Telefonica SA.
* Standard & Poors has downgraded the long-term credit rating of Qwest Communications International Inc, the USA's fourth largest telecom company, from a triple B minus to BB+ (the highest junk grade). This assumes that Qwest manages to sell its directories business for about USD8bn.
Qwest has a series of pending investor lawsuits and an on-going Securites and Exchange Commission investigation into accounting practices, such as engaging in capacity swaps, or indefeasible rights of use (IRUs) with companies like Global Crossing Ltd and Enron.
Qwest is relying on the sale of non-core assets (wireless properties and access lines) for a hoped-for USD10bn and 2000 lay-offs announced in April to reduce its USD26.2bn debt.