KPNQwest faces cash crunch

KPNQwest has seen its debt mount after a spending spree to expand its fibre optic networks

AMSTERDAM, Netherlands -- KPNQwest, the Dutch data communications company, said on Wednesday it is running out of money and needs to cut its debt or sell assets to keep operating for the rest of the year.

But KPNQwest, which has debt of more than 2 billion euros ($1.8 billion), said it does not plan to seek bankruptcy protection while it sorts out its financial problems.

"That is not an option at this point," Russ Wilkinson, the company's investor relations director, told Reuters.

Instead, the company said it would attempt to find new capital from existing or new investors, sell some of its assets and restructure its debt.

KPNQwest shares, which have plunged almost 90 percent this year, fell another 50 percent to 0.49 euros on Wednesday in Amsterdam.

KPNQuest, which provides Internet services throughout Europe over its fibre optic networks, has been hit by a slowdown in the telecoms market -- leaving it with over capacity and mounting debts after a spending spree to expand services.

The company, whose main shareholders are Dutch telecoms group KPN and U.S. operator Qwest Communications -- reduced its profit forecast by 20 percent in April and said it would restructure its financing to meet its funding needs.

However, it now said those goals have not been met and the company faces a critical cash crunch.

"Under the present circumstances, without sufficient additional financial support from shareholders, strategic buyers or third party investors, KPNQwest is unable to draw further funds from the existing credit facility in order to meet its funding requirements for all of 2002,'' the company said in a statement.

"KPNQwest believes that there is substantial risk that there may be no underlying value to either its debt or equities securities.''

Meanwhile, Qwest said on Wednesday that it would not provide new funding to KPNQwest.

The U.S. operator said in a statement it "will not make additional investments in KPNQwest unless it makes sense for Qwest share owners. Qwest believes it has no other obligation to fund KPNQwest."

Last month, Qwest posted a bigger-than-expected loss and said it would focus on dealing with its own debt troubles. It recently took a large write-down on its KPNQwest joint venture.

The Dutch operator, KPN, has not commented on KPNQwest's financial problems.