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Interoute's Back From the Dead

In what may be the industry's fastest-ever restructuring, London-based carrier Interoute Telecommunications said Wednesday it has come out of receivership and has been cleared of its debts (see Interoute Re-Acquires Assets). Receivers were appointed last month to ready Interoute for liquidation after Alcatel SA (NYSE: ALA; Paris: CGEP:PA), which had financed much of Interoute's network buildout, decided it wanted to look for an exit strategy (see Interoute at Dead End?).

Thanks to the settlement between Interoute and Alcatel, Interoute has, in just a few days, gone from putting itself up for sale to talking tall about buying other companies. "We're really excited about this settlement, because it puts us in a fantastic position," says Matthew Finnie, Interoute's senior VP of market development. "It's a great time to buy and now that we're back on track... our future growth is not just [coming from] organic service growth, but also [from] acquisition."

The financial terms of the agreement between Interoute and Alcatel were not disclosed. Interoute, however, maintains it was Alcatel that was holding up its progress. "Getting funding from Sandoz Family Foundation [Interoute's largest backer] was never an issue," Finnie says. "That was the bizarre thing in this whole ordeal. What was at issue was restructuring an out-of-date agreement that every other telecom operator in the world had restructured."

That said, Interoute's relationship with Alcatel as a carrier to a vendor hasn't changed. However, "From a vendor-financing perspective, the relationship has changed considerably," Finnie says.

Alcatel won't be providing any further financing for Interoute, he reveals.

Interoute also confirms it had to trim its ranks when negotiations with Alcatel hit the wall. "Because of the previous collapse we laid off 250 people, so we're now rehiring," Finnie explains. He says there's no telling how many the company will hire back.

Lastly, Finnie brags that service interruptions were kept to a minimum during the receivership. "Our customers were very good," he says. "By and large they really stuck with us.

"If Interoute had gone away, it would have come down to very few suppliers in Europe... and having just one [independent carrier] with a handful of incumbents doesn't do it for Europe anymore."

— Phil Harvey, Senior Editor, Light Reading
borabora 12/4/2012 | 9:09:45 PM
re: Interoute's Back From the Dead I wonder how loyal the re-hires will be?
I wonder how interested customers will be in buying from a company that just went through what Interoute did?
BuckStopsHere 12/4/2012 | 9:09:41 PM
re: Interoute's Back From the Dead The Chapter 11 business model strikes again. Actually, as evidenced by the speed with which Interoute executed their Chapter 11 business model, it would seem that executive managers have mastered it. Run up huge amounts of debt to build out a network, go into Chapter 11 and erase all the debt, and then you have a great company. Of course, a lot of people lose a lot of money in the process, but not the people OPERATING the Chapter 11 business model, so who cares. So, in life you have the following choice: A) Try to build a good company from scratch with balanced, well-financed growth, or B) Implement the Chapter 11 business model, starting a company with the exact intention of amassing as many assets as possible without regard to the health of the company, and then once people figure out you're broke, go into Chatper 11. Since Interoute has now shown that in a matter of days you can wipe out years of neglectful management, and since they are now possibly in a much better competitive position than a company that has grown with moderate sense, why bother getting an MBA and working hard to start a good company. Instead, just go for bust and screw the investors. DAMN THE TORPEDOS!! LONG LIVE THE CHAPTER 11 BUSINESS MODEL!!
jayja 12/4/2012 | 9:06:52 PM
re: Interoute's Back From the Dead Of course, in return for enormous political contributions from banks and credit firms for the 2002 elections, the first thing the new US Congress will do in 2003 is pass legislation to prevent individuals from doing the same thing.
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