Metromedia Fibre Networks, a provider of internet infrastructure which has invested $100 million (€111 million) in Dublin, has failed to meet a financing deadline set by international bankers.

Shares in the US-based business which is backed by US billionaire Mr John Kluge, plunged almost 35 per cent yesterday in trading following the announcement by Metromedia.

US bank Citicorp had said it would supply Metromedia with $62.5 million in financing if the firm was able to raise $287.5 million from other sources by close of business yesterday.

But Metromedia, which has been selected to host Microsoft's plan to distribute software over the internet from Dublin, admitted yesterday it had been unable to secure funding from other sources.

Metromedia's difficulties will cause concern in the Republic, where Metromedia has almost completed a $75 million internet data centre in Citywest and a $40 million fibre ring in Dublin.

Last week, subcontractors at the Citywest facility temporarily ceased work due to a dispute over payment at the site.

The US-based company also reported second quarter results yesterday which showed a net loss of $205.2 million, compared with $92 million for the same period last year.

Revenues rose to $91.7 million, from $43.3 million.

In June, Metromedia lowered its financial forecast for the year, citing slowing sales to internet customers.

Metromedia is one of several major telecoms and web hosting firms which have run into financial difficulties following a massive slump in the web hosting market this year.

Last month, 360Networks - a Canadian-based telecoms firm which laid a transatlantic fibre optic cable between the US and the Republic - filed for bankruptcy protection.

Mr Rory O'Ferrall, a chartered accountant of Deloitte and Touche, was appointed official liquidator.

Metromedia, which loses millions of dollars in cash each quarter, could run out of money and face possible bankruptcy if it cannot raise additional financing.

Earlier this month, Citigroup extended until August 15th a commitment to provide a portion of $550 million in financing, while Metromedia tried to find more lenders.

Metromedia has received two extensions from Citigroup. The deadline was originally set to expire on June 30th.

Under its commitment letter, Citigroup agreed to provide $62.5 million as long as other sources committed to providing $287.5 million.

Metromedia also needed to secure $200 million of vendor financing, for a total financing package of $550 million.