The UK-based hedge fund, which is affiliated with the Elliot Group in the US, has said it intends to petition a UK court to appoint an administrator to Colt Telecom. Highberry owns a large number of Colt corporate bonds and claims that Colt will not be able to repay or refinance its bonds when they become due between 2005 and 2009, thereby justifying the appointment of an administrator.
The UK telecommunications firm appeared to be taken aback by the action, and has strongly denied Highberry's claims, saying the accusations were "without foundation." Defending itself, Colt said it has STG1 billion in cash and no bank debts and expects to be free cash-flow positive during 2005. The company also said its earnings are growing and its capital expenditure requirement is reducing, as the construction of its core network is complete.
Chief Executive Steve Akin has said that the business fully expects to be able to repay the corporate bonds by the time they fall due. "The company is in excellent shape," he said.
Although Highberry has indicated its intention to approach a court with a view to petitioning for the appointment of an administrator, the hedge fund has so far not done so. If the action is taken, the judge will assess the evidence presented by Highberry and decide if an administrator appointment would be in the best interests of the company.
Last month, the company announced that it was to cut 800 jobs across its European operations, including Ireland, over the next 12 months in a bid to save STG40 million a year.
When those jobs were cut, the UK telecommunications firm updated its expectations for the quarter ending in September, saying it expects EBITDA (earnings before interest, tax, depreciation and amortisation) to improve to approximately STG17 million, compared with the STG14.7 million reported for the quarter ended 30 June. Turnover is expected to be at a "similar" level to the STG258.3 million reported for the quarter ended 30 June, Colt said, and it will increase by approximately 12 percent over the third quarter of 2001. Capital expenditure for the quarter is expected to be less than the STG111 million reported for the second quarter.
In Ireland, where the company employs some 40 people, the firm announced at the start of September that the newest phase in its 120km network in Dublin had been extended to western regions of the city and county. It "moth-balled" its Irish data centre earlier this year.