Telecom Seeks Certainty Over Clear's Mounting Debt

Telecom Seeks Certainty Over Clear's Mounting Debt

Telecom has sought orders in the High Court aimed at safeguarding its ability to recover money Clear owes Telecom for interconnection payments. Clear has been withholding significant payments due under its interconnection agreement with Telecom since January 1997.

This move follows advice obtained by Telecom from a leading corporate financial adviser that it would be "commercially imprudent" for Telecom to be an unsecured creditor of Clear for sums exceeding $20 million.

"Clear already owes Telecom over $20 million. This debt is rising monthly and potentially will keep rising until this matter is finally decided by the courts. This could be one or two years away, when the debt could be up to $40 million.

"At the same time Clear's profitability is reported to have dropped and there has even been speculation Clear could run at a loss this year," Telecom Manager External Relations Clive Litt said.

"We believe that there would be real doubt about Clear's ability to satisfy a judgment in Telecom's favour for $20 million or more, particularly if Clear's profitability continues to decline at the same rate as in recent years.

"So Telecom is acting like any prudent creditor and taking what steps it can to protect its position. Firstly we are asking to be paid what we are owed. That would be the principled thing for Clear to do, rather than reneging on its obligations under a major commercial agreement negotiated at length. Alternatively we have asked the court to safeguard the debt. We have proposed a variety of ways of achieving this: by appointing a receiver over the debt, or having the withheld amounts paid into an interest bearing account held by the Registrar of the High Court or by Clear providing suitable security for the withheld sums.

"We just want Clear to pay the money it owes us. If the court will not order payment Telecom needs sufficient security to be sure Clear can repay the increasingly large amounts it owes."

ENDS

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