Shares in Global Crossing, a leading US telecommunications firm, have fallen by more than a third amid mounting fears that the company is on the point of filing for emergency bankruptcy protection.

The company's stock closed at 74 cents on Thursday, 34% down on the day and 99% below its March 1999 peak, as investors took the view that it may soon be unable to service its debts.

Global Crossing has been attempting to renegotiate around $2.2bn in debts since last month.

"We are in compliance with our bank covenants, but expect to be in violation of them by the end of the year, based on our outlook, unless we work out other arrangements," a company spokesman said.

Out of favour

But fears of impending doom were were reinforced by a sharp downgrade at ratings agency Moody's for the company's debt earlier this week.

"The rating reflects our heightened concern that Global Crossing's business plan may be increasingly pressured by protracted softness in global telecom spending and our view that liquidity may be insufficient to sustain a fully funded business model," the agency said.

Not that worries were not already building - particularly after rival "carrier's carrier" Qwest and troubled equipment vendor Lucent both reported earnings much worse than expected.

"There's nothing concrete," said one London broker. "But there's no chance that things are going to get any better for telecoms carriers in the short term."

Companies - like Global Crossing - which are very heavily leveraged are at grave risk of going under, he said.

"Basically, after Enron everyone is on tenterhooks... Global Crossing is one of those people are tipping to topple next," he said.

Out of favour

Global Crossing posted high growth figures over the last two years as soaring internet use boosted demand for its undersea fibre-optic cable network.

Formed in 1999 from a merger between a Bermuda-based fibre-optic cable specialist and a local US telecoms operator, Global Crossing was regarded as one of the most promising of the new generation of telephone companies that sprang up in the late 1990s.

But the economic slowdown and an increase in competition, together with heavy debts, have hit the company hard.

Global Crossing reported losses of $3.4bn during the three months to September, and announced plans to axe a total of 3,200 jobs.

Analysts said a worsening outlook for the telecommunications sector as a whole was also weighing on the company.

"The probability of global Crossing making it through 2002 without some sort of recapitalisation ...is probably slim," said Anthony Klarman, an analyst at Deutsche Bank.