Landlord Headache Alert

Chatter about the fate of Cable & Wireless' US operation continues, with the Financial Times reporting over the weekend that the company is working on a prepackaged bankruptcy and sale. This approach would dramatically reduce the cost of exiting US leases, making the ongoing business much more attractive to potential acquirers.

As always, once the rumor mill gets going it's hard to know what to believe. A report last week that the US unit would file Chapter 11 Friday evening proved to be untrue (see update here ), while other weekend coverage highlighted the rumored collapse of talks with one suitor.

While a prepackaged Chapter 11 filing might help Cable & Wireless solve its problems, it would be a huge headache for the company's landlords, as a bankruptcy would allow the company to reject leases on surplus properties. Given current interest in high-quality data centers from Wall Street and the enterprise sector, some of the surplus sites that aren't acquired could be sold off piecemeal through the bankruptcy process.

Stand-alone data centers would be particularly attractive on the resale market - but the most marketable centers might well end up being among those included in any bundled sale. Cable & Wireless' US operations include a 230,000 square foot Internet Solutions center in Reston, Va. and a 200,000 square foot presence in Weehawken, NJ.