Hedge fund Highberry, one of the largest investors in Colt Telecom, is going ahead with its threat to try and force the telecoms group into administration.

Highberry, a subsidiary of the New York hedge fund Elliott Associates, has claimed that Colt will be unable to repay or refinance its bonds which are due between 2005 and 2009.

The fund has now taken its claim to the High Court in a bid to break up the company.

But Colt has dismissed the suggestion that it will not be able to repay its bonds, describing Highberry's claims as "self-serving and without merit".

Pay up

Highberry holds �75m worth of bonds in Colt Telecom and is trying to protect this investment by putting the company into administration and claiming the assets.

But Colt said it was confident of meeting bond payments and that it had �1bn of cash on its balance sheet.

Colt welcomes the opportunity to demonstrate in court why Highberry's action is self-serving and without merit

Colt Telecom

Analysts said there was little chance of Highberry succeeding in its move, particularly since the bonds are not due for another three years.

The claim is also unusual, given that Colt has never missed a debt payment and not warned that it would struggle to meet its repayments.

Colt said that its board "welcomes the opportunity to demonstrate in court why Highberry's action is self-serving and without merit".

Tough customer

However, Highberry has famously managed to sue the Peruvian government over debts.

In 2000, the hedge fund achieved a $58.4m (�37m) payout from Peru over a dispute involving bond repayments.

Parent company Elliott Associates has also taken on large companies

Highberry claims that Colt has been overly positive when stating its future profits and questioned the suggestion that the telecoms market can recover.

Colt, which specialises in providing telecoms services to businesses, was forced make 800 job cuts last month as part of the ongoing slowdown sector.

But it said there was "no basis whatever" for the Highberry's claims.