UK-based operator Interoute – which is majority-owned by the Sandoz Family Foundation – put its i-2network into administration on 20 November.
Interoute had invested heavily in the construction of a 18,000 route-km pan-European data and voice network with 60 metro Points of Presence. Though it sold its wholesale voice operations to Wavecrest Communications, in July it bought the Ebone segment of bankrupt Netherlands-based KPNQwest NV's data network (Europe's largest) for just EUR15m. Interoute said it had revenues in excess of EUR310m in 2001 and had no debt.
But several months ago Interoute started a restructuring that involved focusing on the business services, cutting staffing by 50% and raising new financing.
Paris-based telecoms equipment maker Alcatel is the main supplier as well as a creditor to Interoute, providing most of its vendor financing according to Alcatel. Interoute is said to have guaranteed Alcatel 20% of its EUR500m investment. However, Interoute said that Alcatel rejected the vendor financing renegotiation offer.
Under its old business plan, Interoute would need another EUR1bn to break-even by 2007, but its new refinancing plan required far less and was said to have had the backing of all its original investors, including Sandoz, which had invested about EUR1.1bn. Alcatel's approval had been the final step in the refinancing process.
Although Alcatel is still in discussions with Interoute, "We have excercised our right to appoint a receiver [Deloitte & Touche in the UK, via Alcatel's bank Electro Banque SA] to work on a long-term solution for the network and to recuperate what is owed to us," Alcatel's Klaus Wustrack told Lightwave Europe. He claims that Sandoz's decision to stop funding the network had forced it into administration. However, Alcatel has "senior security" over the "totality" of Interoute's network and expects to recover most of the assets in any sale of the network, adds Wustrack.
Alcatel had already taken provisions in its Q3/2002 results to cover the risk that Interoute may default on its loans, he added.