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ICG's

(ICGX)

widely awaited

bankruptcy filing Tuesday underscores the risks of vendor financing:

Cisco Systems

(CSCO) - Get Cisco Systems, Inc. Report

stands to be out as much as $180 million in loans to the troubled telephone company.

Lots of eyes are on this latest casualty in the hypercompetitive, capital-constrained telecom market and see the ICG example as foretelling failures to come. This puts added pressure on the

big three lenders to the telecommunications buildout: Cisco,

Lucent

(LU)

and

Nortel

(NT)

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, as more bad debt will surely pile onto their balance sheets as the shakeout continues.

Lucent, Nortel and Cisco have committed $7 billion, $3.1 billion and $2.4 billion in loans, respectively, to customers.

The full impact Cisco may feel from ICG's bankruptcy is difficult to determine because, as with most vendor financing deals, not everything is fully disclosed. Cisco committed to $180 million in loans to cover equipment purchases, according to documents filed with the

Securities and Exchange Commission

. But it's not known just how much operating capital or hours of technical support were sunk into the floundering company as well. In addition, Cisco could get some money back through the bankruptcy proceedings as ICG tries to pay back its creditors.

To be sure, ICG is a minor ripple on the big capital pool that Cisco manages, but the company now has been burned twice in vendor financing deals. Earlier this year,

Pacific Gateway Exchange

defaulted on $2.7 million in loans from Cisco. Cisco is relatively new to the business of lending customers money to buy its Internet routers and switching equipment and yet already has racked up $2.4 billion in loan commitments. To date, $625 million has been drawn on that total.

"We have become more focused as we see the challenges in the market," said Kevin Kennedy, Cisco's chief of telecommunications sales. "I think it teaches us all that we need to do a much better job of due diligence."

Kennedy said ICG had a reasonably good business plan and realistic revenue-per-customer expectations, but faltered as it tried to bring up their operations. "We had to do a lot of work with them to bring the network up," he said.

But Cisco boldly lends on. Last week it committed $500 million in loans to

Winstar Communications

(WCII)

, which has had its own share of troubles on Wall Street.