The cash crunch facing European backbone telecoms operator KPNQwest NV has turned into a full-blown crisis after it revealed that its banks have pulled the plug on its credit facility.
The Hoofddorp, Netherlands-based carrier which last month finally admitted that it could be forced into a massive debt-for-equity swap to sort out its financial position, said yesterday that it had experienced a deterioration in its liquidity position, and that without its credit facility it would be unable to meet its funding requirements for the rest of the year.
Its share price, which has fallen from a 52-week high of 15.20 euros ($13.77) in May 2001, collapsed on the news to just 0.60 euros ($0.54). KPNQuest said that it believes its debt and equity securities "could face significant further impairment" and that there is "a substantial risk that there may be no underlying value to either."
It has retained Bear Stearns & Co Inc and Bank of America Securities Ltd to advise it on recapitalization opportunities as it seeks to raise funds or find a buyer. Last month, 40% owner Dutch incumbent telecoms firm KPN NV publicly stated that it would not be putting more finance into the company, after its joint venture with Qwest issued a profit warning.
KPNQwest announced substantially reduced projections for 2002 EBITDA, pushing them down to 140m euros ($125.8m) from 175m euros ($157.2m). These forecasts had previously reached as high as 200m euros ($179.7m).
At the same time, the company also reappraised its revenue targets, pushing 2002 revenues down to about 1bn euros ($898.4m). The company blamed a collapse in wholesale pricing, and the closure of the markets for indefeasible rights of use (IRUs).
This was mainly due to the scandal erupting in the US, where KPNQwest's 47% owner Qwest Communications International Inc is one of the many companies being investigated for its role in possibly fraudulent transactions involving IRUs, some of which could have involved KPNQwest.