British telecommunications group Cable & Wireless said it is in talks with its bankers for a £1.5 billion sterling guarantee after its debt ratings were cut to junk status.
The firm, currently overhauling its loss-making Global division, said it had been forced to seek the guarantee after credit rating agency Moody's Investors Service moved yesterday to downgrade the company's long-term debt rating to junk.
The downgrade triggered a 1999 agreement whereby C&W promised to indemnify another telecoms firm, Deutsche Telekom, against any potential tax liabilities arising from C&W's sale to Deutsche of its holding in a mobile phone firm.
At the time C&W sold its 50 per cent interest in UK mobile phone operator One2One for £3.45 billion, Deutsche feared it could face large, acquired tax liabilities.
It insisted C&W should stump up £1.5 billion against such a possibility if ever C&W's credit ratings fell into junk territory.