Nov. 12, 2003 -- Cable & Wireless had no major announcements of either a sale or bankruptcy filing for its US business as it reported results today, but the
company has been busy cutting costs and whittling down its data center network.
C&W, which said in June that it would exit the American web hosting market, has shuttered eight US data centers in the last six months, leaving it with 14 facilities. The company's data center network was purchased from Exodus Communications and Digital Island in 2001-02, and included 27 centers a year ago.
C&W is also leaving the door open for a Chapter 11 filing, which has been widely rumored in recent days. "No decisions have been made" about whether to place the US unit in bankruptcy, according to CEO Francesco Caio. "We're still looking at a wide range of options."
Significantly, C&W confirmed that it has legally separated the American operations from the parent company, which would clear the way to place the US assets in bankruptcy without the filing affecting the British parent company.
"We have created a stand-alone structure for the US business that we think is the appropriate platform to evaluate a wide range of options," said Caio. "As soon as we finalize and select the best option we will go back to the market and illustrate the economics, the timing and the process of the exit."
While a prepackaged Chapter 11 filing might help Cable & Wireless solve its problems, it would be a huge headache for landlords, as a bankruptcy would allow the company to reject leases on surplus properties, and renegotiate other leases.
In a press conference in London, Cable & Wireless executives were deliberately vague about the costs of negotiated lease settlements, a subject of keen interest among US landlords and British investors alike.
Caio said Cable & Wireless had reduced its American property lease obligations by about $335 million (200 million pounds), leaving a total estimated exposure of about $1.08 billion (650 million pounds). The US unit reported $289 million (173 million pounds) in non-operating expenses in the six-month reporting period, but said not all of that was related to lease settlements.
Despite questioning from journalists and analysts, C&W executives would not parse the numbers any further.
"We'll give you no specific correlation between expenditures and lease exit costs in the US because there are interested parties waiting to hear exactly that," said Chairman Richard Lapthorne. "We're in negotiations on leases today, and our American colleagues have appointed tough people to run this for us.
"We know the questions you have," Caio added. "Going any further in our disclosure will be commercially unhelpful at this stage."