KPNQwest files for protection

KPNQwest has seen its debt mount after a spending spree to expand

AMSTERDAM, Netherlands (CNN) -- KPNQwest, the ailing Dutch telecoms company, has filed for protection from its creditors and its supervisory board has resigned.

KPNQwest said on Thursday it had filed for protection under Dutch moratorium law "as it continues its dialogue with strategic investors and works with its banks and advisors to find funding alternatives."

The company warned last week it was running out of money and needs to cut its debt or sell assets to keep operating for the rest of the year. It has debts of more than 2 billion euros ($1.8 billion).

KPNQwest said its lenders have "insisted" that it sell certain assets but the company has yet to find buyers.

"Although this was widely expected this will still come as a shock to investors," Khuram Chaudry, equity strategist at Merrill Lynch, told CNN.

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"The receivers will come in and see what they can sell. They (KPNQwest) have some worthwhile assets but equity shareholders will be the last to receive anything from this."

KPNQuest, which provides Internet services throughout Europe over its fibre optic networks, has been hit by a slowdown in the telecoms market -- leaving it with over capacity and mounting debts after a spending spree to expand services.

CNN NewsPass VIDEO KPNQwest is considering whether to file for chapter-11 style protection from creditors. Jim Boulden reports. Play video

The decision by its supervisory board members to resign is an indication that its main shareholders, KPN of the Netherlands and Qwest of the U.S., are unwilling to prop up the ailing company. The board consisted of two representatives from Qwest, one from KPN and two independent directors.

KPNQwest shares, which have plunged more than 90 percent this year, were suspended until later in the morning, Amsterdam stock exchange operator Euronext said in a statement.

Qwest, a U.S. telecom operator, said last week it "will not make additional investments in KPNQwest unless it makes sense for Qwest share owners. Qwest believes it has no other obligation to fund KPNQwest."

Last month, Qwest posted a bigger-than-expected loss and said it would focus on dealing with its own debt troubles. It recently took a large write-down on its KPNQwest joint venture.

And Dutch telecom operator KPN posted a loss of 348 million euros earlier this week, which it blamed on a 477 million euro charge for its 40 percent stake in Europe's largest fibre-optic network operator.

KPN had said it has a maximum exposure of 700 million euros to the ailing operator.