Fresh blow for Marconi as Atlantic Telecom goes into administration

Atlantic Telecom, the telecoms group based in Aberdeen in which Marconi has a 19 per cent stake, was yesterday forced to admit defeat and appoint administrators, putting some 400 UK jobs at risk.

The move came despite the fact that it still has some £55m of cash remaining. The company's bondholders are understood to have forced Atlantic into administration in an attempt to recoup some of their investment, after discussions to restructure existing debt, raise new money and sell assets fell apart.

"They [the bondholders] took the view that they weren't going to get their money in 2010," said one source close to the situation.

Both Atlantic's 200m euro (£124m) and £75m bonds were due to be repaid in 2010.

Atlantic said it had not been able to agree to satisfactory terms of refinancing and restructuring after holding talks with noteholders, possible purchasers of assets and sources who could provide finance.

Consequently, the company asked the London Stock Exchange to suspend trading in its shares as it moved to appoint administrators.

The stock, which was suspended at 5p a share, valuing the group at just £11m, had traded as high as 1,190p at the peak of the internet boom last year.

The fate of the company's 400 UK employees, most of whom are based in Scotland, was last night still uncertain, although one source believed there was still hope that some of the group's assets could be sold in a move that might protect jobs.

Analysts thought the company's telecoms assets in the UK, Germany and the Netherlands were each likely to end up with different owners.

"It's a sad day for a company that at one time was doing rather well. All that's left now is for everyone to pour over the carcass," said Nigel Hawkins, an analyst at Williams de Broe.

Atlantic's bondholders, who come higher up the queue than shareholders if any cash is to be handed back, had initially called for a voluntary winding-up of the business back in August, having expressed concern over the company's capacity to meet debt repayments.

Under the terms of its bonds, Atlantic had to find £13m every six months until 2010. The next payment had been due in January and was being held in an escrow account for that purpose. However, early last month it effectively put itself up for sale, saying it thought the value of its businesses would "best be developed either as part of a larger entity" or with the support of a new investor. It warned then that until the results of discussions with potential acquirers and financiers were known it was unable to assess whether there was any "meaningful" value in its shares.

The company, which was originally formed by its executive chairman Graham Duncan as Devanha, secured a stock market listing in 1995 when it reversed into Worth Investment Trust. It first changed names to Caledonian Media Communications before trading under the Atlantic Telecom banner. Last year it spent £520m on buying First Telecom.

A spokesman for Marconi, which invested about £50m in the company as well as contributing vendor financing, said it had already written down the bulk of that cost.

In the first quarter ended 30 June, pre-tax losses totalled £27.5m on sales of £20.1m.