KPNQwest Files for Bankruptcy

ives writes "Today KPNQwest filed for bankruptcy. KPNQwest owns the most important fibre backbone in Europe. Apparently they are not planning on switching off their network, but without maintenance it will probably slowly degrade. The official press release can be found here."

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[moonbender]

There's an in-depth article available in English from the German Heise.de newsticker. Read it here.
There's also a brief article on The Register available here.

Just thought I'd add a few tidbits since the news post doesn't actually link to any objective press coverage, company press releases are usually not the best way to inform oneself.

Corporate bankruptcy in a nutshell

[schnell]

Some people have posted asking about how they're going to pay for keeping their network up, but that most likely isn't an issue, since you don't have to be *out* of money to file for bankruptcy. What they're trying to do by declaring bankruptcy is buy some time to find additional buyers. I'm not sure whether the rules in the EU are the same, but here's how it works in the US:

In the US, the two most common bankruptcy options are to file under Chapter 11 or Chapter 7 of the US bankruptcy code. Chapter 7 filings are what you do when you realize you've irrevocably screwed the pooch, and there's just no way you are ever going to make it. Ch. 7 means you've cashed your check, game over - your assets will be liquidated (sold) to scrounge up whatever cash possible for the companies you owe money to. Everybody goes home, then the earth is sown with salt under your company headquarters.

Chapter 11, however - this is what I presume they're using the European equivalent of - means you think you can turn things around, but you can't do it just yet or you can't do it because your existing debts are too big. You can declare a Ch. 11 bankruptcy when you've still got lots of cash - that's to keep things up and running while you work out a plan to pay back your existing debts.

There's a good side and a bad side for companies filing Ch. 11 - the good side is you get to keep on going, and you don't have to pay back any debts you ran up before you filed! Most of the time, courts will rule that the companies that provide you with critical services (like power, fiber, leases, etc.) can't shut you off during your bankruptcy, even though you've just (potentially) stiffed them for zillions of dollars. This is likely what KPN is doing.

The down side is that you no longer control your company - the courts do. And they pay lots of attention to what your creditors (those folks you stiffed) ask for. Your job is to come up with a plan to pay those creditors back over time for a reasonable amount (anywhere from 10% to 80% of your orginal debt, most likely). If your creditors don't like the plan, or think that they'd get more money back by shutting you down and liquidating assets than allowing you to live and try to pay them back, they can get the courts to probably shut you down. Also, don't forget that your credit is now hosed.

So ... I wouldn't worry about KPN's lights going off anytime soon. They probably filed the EU equivalent of Ch. 11 while they had plenty of cash in the bank to keep it running while they look for someone to buy their assets (probably the only chance they have of satisfying their creditors).