KPNQwest Files for Bankruptcy - TheStreet

Taking only catatonic observers by surprise, European networking outfit



filed for bankruptcy shortly after its entire supervisory board resigned.

KPNQwest said its banks are holding most of its remaining cash and are demanding the company sell some of its assets, which so far it hasn't been able to do.

Qwest Communications


, the Denver telco swimming in debt, and



of the Netherlands each own around 40% of KPNQwest.

KPNQwest also reiterated its earlier statement that its debt and equity securities are probably now worthless.

Qwest, which has its own problems, the latest being a Standard & Poor's

downgrade of its debt to junk status, said last week that it

has no obligation to continue funding KPNQwest.

Qwest said at the time that if KPNQwest collapsed, its own revenue and customer service wouldn't be materially affected. KPNQwest represents about $10 million in quarterly revenue for Qwest.

Still, Qwest potentially faces a charge of as much as $706 million now that KPNQwest has fallen into insolvency. Last quarter, Qwest took a charge of $462 million to write down the carrying value of its investment in KPNQwest, reflecting the Dutch company's badly degraded stock price. At the end of March, KPNQwest changed hands at $3.30. Now the stock, halted for trading Thursday, sits at 50 cents.