Metromedia Fiber Networks, the provider of Internet infrastructure which is building an internet data centre in Citywest, said it had settled a dispute with the main contractor which was delaying payments to sub-contractors and threatening work at the site.

Sources close to Structure Tone, the main contractor, had said Metromedia was behind in two payments for work carried out on the internet data centre in Citywest from which the company plans to host the sale by Microsoft of software over the Internet.

A number of subcontractors were refusing to carry out more work on the site, which is 75 per cent complete, until payment was received, they said.

No figure was available but the sources described the sums as substantial.

But Metromedia's general manager for Ireland, Mr Noel Meaney, said the reports of non-payment were inaccurate and centred on a dispute between Metromedia and Structure Tone which was not financial.

"It wasn't a non-payment," he said. "It was a hold-up about how the payment was to be made, so that is being addressed."

He said all subcontractors would be paid this week.

"It wasn't that we weren't paying them. They're not employed by us. We have removed the blockage that was causing them not to be paid. By Thursday, it will have sorted itself out."

Shares in Metromedia tumbled to just 83 cents last week, down from a 52-week high of more than $42 as it emerged that the firm was facing severe financial difficulties.

US bank Citigroup told Metromedia that it would grant a two-week extension to a commitment to provide $62.5 million in funding, if other sources committed to provide $287.5 million.

This extension followed Metromedia's failure to raise the funding by a July 31st deadline set by the bank.

Metromedia said it had received commitments for $180 million of the $287.5 million.

In addition, Metromedia must also line up $200 million of vendor financing, for a total financing package of $550 million.

Mr Meaney said this finance was not for operational support, but for additional build-outs and would not affect the Internet data centre in Dublin.

"It's not linked with the funding of the Dublin project. That is a funded project," he said. The Internet data centre, which is costing $75 million to build, was 75 per cent complete and would go live by the end of this month, said Mr Meaney.

The company has built a $40 million fibre ring in Dublin and recently completed a deal with a telecoms company to provide services using its fibre throughout the city.