£1.5bn tax liability for C&W
A potential tax liability could indefinitely tie-up almost 70% of Cable and Wireless' net cash.
A clause in the 1999 agreement with Deutsche Telecom means that £1.5bn of its £2.2bn net cash could be forced into an escrow account in case of tax liabilities.
The telecoms group has been criticised for not declaring the clause to shareholders, but responded by saying it had ‘no requirement’ to do so.
The clause was triggered late Friday after the group’s debt rating was downgraded to junk status by Moody’s. C&W claims that its auditor, KPMG, advised there was no reason to reveal details of the clause because a downgrade was considered a sufficiently remote possibility.