Bondholders in threat to sink Atlantic Telecom

Atlantic Telecom yesterday admitted that unless it can quickly reach an agreement with its bondholders, its shares could be worth nothing.

The company put itself up for sale but said any transaction would be dependent on reaching a deal with bondholders, most of which have been clamouring to have Atlantic wound up.

Some £200m is owned by bondholders and this would become repayable if there were a change of control at Atlantic. The company has recognised that in the current market, no buyer would be prepared to pay £200m or more for its assets, so it needs bondholders to agree to accept much less.

The company said: "Until the results of these discussions [with bondholders] become clearer, the board is unable to assess whether there is any meaningful value in the ordinary shares."

Atlantic said it had approached the main bondholders' group and it would put a proposal to them next week. Many of the bondholders believe they will get more if the company is placed in liquidation than sold as a going concern.

Company sources said these bondholders were wrong and Atlantic had no current plans to go for liquidation.

Atlantic's shares crashed 48 per cent yesterday to 3.5p, to value it at just £7.5m. The stock soared as high as 1190p last year, at the height of the telecoms boom but its descent has been equally steep. Marconi, another stricken telecoms player, is Atlantic's biggest shareholder, with a 19 per cent stake.

Nigel Hawkins, an analyst at Williams de Broe, said: "It's a very sad tale of woe. They're now in the last chance saloon."

Atlantic said it could not go on as a standalone business: "The board believes that the value of Atlantic's businesses would be best developed either as part of a larger entity...or alternatively with the support of a significant new investor that is able to provide the additional liquidity that the company requires."

The company said it had started talks with potential investors and buyers. Although its net assets officially stand at £522m, as it has networks in Germany, the Netherlands and the UK, such assets fetch very little in the current depressed telecoms marketplace.

It has put in place cost-cutting measures that aim to save £65m a year and made 600 workers redundant. At the end of June, Atlantic had £55m of cash left.

Like other operators, Atlantic's business plan required large capital investment to create the networks, and it assumed the markets would provide the funding needed.

Mr Hawkins said Atlantic overstretched itself and blamed its downfall on its £520m takeover of First Telecom last year, which provided its foothold in the German broadband market.