Zardon

AT&T LATIN AMERICA posted a net loss of Godzilla proportions in its third quarter, and warned that it could be forced to seek bankruptcy protection during this current quarter, the company announced Thursday.

Net loss came in at $532.3 million, or $4.48 per share, orders of magnitude higher than the $0.60 per share expected by one Wall Street analyst polled by Thomson Financial/First Call. The net loss in the third quarter, ended Sept. 30, compares with a much smaller net loss of $79.7 million, or $0.69 per share, in last year's third quarter. Revenue was $39.9 million, a 1.7 percent increase over last year's third quarter.

The company, which provides telecommunication services to businesses in five Latin American countries, also announced that its total debt as of Sept. 30, stood at $849.1 million, which includes $603.9 million from parent company AT&T and $162.4 million in financing from equipment vendors Lucent Technologies, Nortel Networks, and Cisco Systems.

Because AT&T Latin America isn't meeting the minimum revenue targets it committed to as part of the vendor financing arrangements, the vendors in question could "commence foreclosure proceedings on the company's assets," the company said in Thursday's statement.

AT&T Latin America is also in default of other credit agreements which would allow those lenders to seek remedies against the company. In that case, AT&T Latin America "would likely need to seek protection from its creditors under U.S. bankruptcy laws and/or under the laws of the countries in which it operates, potentially during the fourth quarter," the company said in Thursday's statement.

For the full year, AT&T Latin America expects revenue to be in the range of $160 million to $170 million. It operates in Chile, Colombia, Argentina, Brazil, and Perú.

Last month, AT&T Latin America warned that it was slipping into negative cash flow with a funding gap that could grow to about $40 million by end of 2003, assuming continued access to the vendor financing, without which the cash crunch would be even higher.

Back in October, the company blamed the expected liquidity shortfall on a variety of things, including a worsening economy in South America, particularly Brazil, and AT&T's decisions to not help AT&T Latin America with its taxes, to not provide AT&T Latin America with additional financing or credit support, and to deal directly with some of its clients in Latin America, which would diminish AT&T Latin America's revenue stream from those accounts. AT&T owns a 69 percent stake in the company.

On Thursday, AT&T Latin America announced that to address the funding gap it has implemented a company-wide plan to save cash, including layoffs resulting from a centralization of its back-office operations, reduction or elimination of discretionary spending, renegotiating arrangements with certain suppliers and pursuing sales that don't require significant new investments. It will also need to defer near-term obligations to creditors, restructure its debt, and obtain additional third-party financing.

In midday training, AT&T Latin America's (ATTL) shares had plunged 25 percent to $0.18. The stock's 52-week high is $2.37 per share. Juan Carlos Perez