Comindico goes into administration

Comindico goes into administration

News that Comindico has gone into voluntary administration following the breakdown of investment negotiations has sent shockwaves through its ISP community.

Managing director of Dodo Internet, Larry Kestelman, said it would cause his company serious problems if Comindico was to close but remained hopeful this would not happen.

"If the company was to close it would affect my business tremendously," he said. "But there's no indication that will happen. It's just a question of selling the assets.

"We will be fine as long as the network continues to operate. This is just internal jostling as far as I'm concerned and I try to stay out of that."

But despite his confidence that the Comindico network would emerge unscathed from the current administration process, Kestelman said he had other options to fall back on if necessary.

"We work across multiple networks and have backup solution in place," he said. "We have been a big supporter of Comindico from day-one and it would be sad to see them go."

Senior management of several other ISPs contacted by ARN were either in meetings discussing the announcement or unwilling to comment at this early stage on the effect it was likely to have on their business.

Peter Walker and Steve Sherman of Ferrier Hodgson have been appointed to handle the process. The first meeting with creditors of the Internet-based telco is planned for September 28.

"As a result of the immediate unsolicited level of interest shown from a number of parties, the administrators are confident that the business can be maintained and sold as a going concern," a statement issued by Ferrier Hodgson read.

"The appointment of administrators became necessary following a breakdown in negotiations with potential equity investors. It was and remains the board's view that a planned capital raising would have been sufficient to address short-term debt as well as provide adequate reserves to enable the group to reach a position of positive EBITDA."

This had already been a tough year for Comindico, following the departure of CEO John Stuckey and 36 staff in April.

Comindico Chairman, Barry Wheeler, who took up his position in January, told ARN at the time of Stuckey's departure that he had been concerned at the lack of a strategic plan. He cited operating inefficiencies caused by duplication for the staff cuts.

Since launching four years ago, Comindico has incurred start-up costs of about $400 million. This includes $175 million of vendor financing from Cisco, the largest unsecured creditor.

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