Cable & Wireless has managed to exit its loss-making US businesses in a deal that will cost the telecoms group much less than feared, sending its shares sharply higher.
Under the terms of the $125 million (£72 million sterling) sale of most of its US assets to an affiliate of Gores Technology Group, Cable & Wireless said it would put the units into Chapter 11 bankruptcy.
The sale proceeds would be used to meet the US business's liabilities. Cable & Wireless estimated the remaining cost of exiting the US would not exceed £300 million.
"That's very much at the low end of what people were expecting," ABN Amro analyst Stuart Gordon said, adding that some analysts had estimated the US exit would cost the firm closer to £800 million.
Cable & Wireless shares leapt as much as 10 per cent. At 8:13 a.m. on Monday they stood 7.4 per cent higher at 139 pence. Its 8.75 per cent sterling bond, due August 2012, was bid three points higher at 107.5 per cent of face value.
The 131-year-old firm, struggling to protect its core corporate business from tough competition, said the sale under Chapter 11 of the US Bankruptcy Code would permit a restructuring of the businesses to create a substantially lower cost base "primarily through the elimination and renegotiation of certain lease and other contractual commitments."
Cable & Wireless said the offer from Gores comprised $50 million in cash and $75 million in a loan note. The firm said it expected an impact of £10 million to £15 million on its fourth-quarter operating profits from the decision.