Banks back Energis as receivership fears maul shares

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The Independent Online

Energis, the telecoms group in danger of breaching loan covenants, won the support of its bankers yesterday as its shares took a fresh pounding amid fears it could be forced into receivership.

"Energis has held initial talks with as many of its relationship banks as possible. They have indicated their desire to support Energis," the company said in a statement released after the market closed.

Shares in the company earlier sank 5p to 18p, continuing their slide from Thursday when they halved in value after the company's third profit warning in six months and the disclosure it was close to busting the terms of a £725m loan agreed last month.

Analysts said the banks were likely to seek swift repayment of the loan by forcing a break-up and sale of the company. While Energis's UK operations generate positive earnings before interest, tax, depreciation and amortisation, its continental businesses remain loss-making.

Nick Delfas, telecoms analyst at Lehman Brothers, said Energis was caught in a vicious circle, with its falling share price likely to prompt its customers to move elsewhere for fear of its future.

"The problem for the banks is whether it will be harder to offload Energis than to soldier on. Even if they only give it a slap on the wrist for now, receivership will remain a possibility," he said.

Said another analyst: "Banks have already lost a lot of money in telecoms. They can either take another risk on Energis, or push for a fire sale of its assets."

David Wickham, Energis's chief executive, secured the problematic loan last month at just 2 percentage points above the interbank loan rate ­ an unusually generous rate given the riskiness of the sector.

However, its terms committed Energis to maintaining an earnings-to-debt ratio that left little margin for error, and on Thursday Energis warned that earnings for the year to March would be 10 per cent lower than market forecasts.

Nigel Hawkins, analyst at Williams de Broe, said it was doubtful whether National Grid, a 37 per cent shareholder, would bail out the company.

Separately, Energis's smaller rival Fibernet, which provides data networks to the corporate sector, saw £97m wiped from its market value after warning that orders were taking longer to complete and revenue growth this financial year would be significantly below forecasts. The shares slid 43 per cent to 207.5p.

"We are absolutely not another Energis. Our business plan is fully funded," said Charles McGregor, its chief executive.

As shares in other telecoms companies, including BT, Cable & Wireless and Colt Telecom retreated, Thus, the Scottish communications group, defied the gloom with better-than-expected third quarter results. Its shares closed up 2.5p at 38.75p.

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