ASX-listed tier two telco One.Tel has been placed into the administrative care of Ferrier Hodgson, after auditors Ernst & Young revealed a $132 million capital raising bail-out would be insufficient to keep the company solvent yesterday.
The news has increased the already nervous state of One.Tel's technology partner and major creditor, Lucent Technologies. Lucent is in the final testing stages of a $1.2 billion national GSM network which it funded on the telco's behalf. One.Tel is alleged to owe approximately $600 million for the rollout.
According to a Lucent spokesperson, scrip on the GSM network deal is held by a syndicate of banks. However, Lucent has underwritten the banks' commitment and will ultimately feel the brunt of any financial collapse the group experiences.
Administrators Steve Sherman and Peter Walker of Ferrier Hodgson will begin an immediate review of One.Tel's operations. "We will hold discussions with its major creditors to identify the best means of maintaining value for the benefit of its stakeholders," said Sherman. "In the interim One.Tel will continue to trade as a going concern."
A preliminary creditors' meeting is scheduled for next Tuesday.
Being subject to different laws, One.Tel's overseas subsidiaries will be dealt with on a case by case basis.
Meanwhile, the Australian Security and Investment Commission has commenced a formal investigation into One.Tel following serious allegations by PBL and News Limited about the company's solvency and disclosure.
A rights issue at a heavy discount of five cents per share was proposed by major One.Tel shareholders, PBL and News Limited in an effort to salvage the telco from severe cashflow difficulties revealed on May 17. News and PBL hold a 41 per cent stake in One.Tel and have injected almost $1 billion into its development over a three year period.