COLT Telecom Group plc - Banco Best

RISK FACTORS
You should carefully consider the risks described below before making an investment decision. The risks
we have described below are not the only risks we face. Additional risks not presently known to us or that we
currently deem immaterial may also impair our business operations.
Our business, financial condition or results of operation could be materially adversely affected by any of
these risks. The trading price of our notes could decline due to any of these risks, and you may lose all or part
of your investment.
This offering memorandum also contains forward-looking statements that involve risks and uncertainties.
Our actual results could differ materially from those anticipated in these forward-looking statements as a
result of many factors, including the risks we describe below and elsewhere in this offering memorandum.
We Are a Holding Company and Depend Heavily on Cash Flows from Our Subsidiaries
Generally. We are a holding company for our subsidiaries and have no material business operations,
sources of income or assets other than the stock of our subsidiaries. All our obligations under the notes that we
are offering will be our own, not our subsidiaries'. Because we conduct our operations through subsidiaries, our
cash flow and our ability to meet our obligations under the notes, including payment of principal, premium, if
any, and interest, depends upon the cash flow of our subsidiaries and their dividends, fees, loans and other
payments to us. Our subsidiaries will have no obligations to make any payments under the notes or to make
funds available to us so that we can make these payments.
Restrictions on Distributions. Some of our subsidiaries may be governed by local laws regarding how
much they may pay in dividends or in what situations they may pay dividends. For example, these laws may
prohibit dividend payments when net assets would fall below subscribed share capital, when the subsidiary
lacks available profits or when the subsidiary fails to meet certain capital and reserve requirements. In
addition, some of our financing arrangements also limit the situations where our subsidiaries may pay us
dividends or make loans or other distributions. In particular, the agreement relating to our £100 million
revolving bank facility limits our subsidiaries' ability to make loans or other distributions to us.
Subordination to our Subsidiaries' Creditors. Our subsidiaries will not guarantee our payment
obligations under the notes. Thus, our right to receive the assets of any subsidiary upon its liquidation or
reorganisation is subordinated to the claims of the subsidiary's creditors, except where we are a creditor of the
subsidiary. If we were a creditor of a subsidiary, our right to be paid back would be subordinated to any
indebtedness of the subsidiary that was either.
• secured by a security interest in that subsidiary's assets or
• senior to that subsidiary's indebtedness to us.
Our Secured Debt Will Have Priority Over the Notes That We Are Offering
Our Secured Debt. Neither the indenture containing the terms of the notes we are offering, nor any of
the indentures containing the terms of our other debt, places a limit on the amount of indebtedness that we
may incur in financing the acquisition of network assets, equipment and inventory or for capital expenditures
and working capital for the telecommunications business. In addition, each indenture permits us to incur up to
£100 million of any other indebtedness. We are generally permitted to secure this indebtedness. Our
obligations under the bank facility (if it is used) will be secured by all the stock of our subsidiaries and by a
fixed and floating charge over the assets of the U.K. operating company and the COLT Telecom Group plc
holding company. Our subsidiaries have guaranteed our obligations under the bank facility.
The Notes are Unsecured. The notes that we are offering will be unsecured. If we default on these notes
or enter bankruptcy, liquidation or reorganisation, then all of our assets that secure our debts will be used to
satisfy the obligations under that secured debt before we could make any payment on the notes. Therefore,
there may only be limited assets available to make payments on the notes in the event of an acceleration of the
notes. If there is not enough collateral to satisfy the obligations of the secured debt, then the remaining
15