Energis defaults on £13.7m bond payment

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The Independent Online

The troubled telecoms company Energis yesterday revealed it would not be making a £13.7m bond interest payment due today as efforts to thrash out a rescue restructuring continued.

Energis also confirmed that it remained in discussions with "a number of parties" over the possibility of selling off some, or all, of the company.

"These [proposals] will be assessed according to their ability to deliver maximum value for company stakeholders in the context of the overall financial restructuring of Energis," the company said.

Shares in Energis, which traded as high as almost £8 during the peak of the internet boom in the spring of 2000, yesterday closed down 27.7 per cent, or 1.06p, at 2.77p as investors fretted the company's bondholders would end up owning the bulk of the business.

"There'll be a restructuring of the debt and, whichever way you cut it, it looks like there'll be significant dilution for equity investors quite frankly," said Kevin Fogarty, an analyst at Teather & Greenwood.

Energis's decision to avoid making the £13.7m interest payment due on £300m worth of its total of £565m in bonds was supported by its key lending banks.

The company has a 30-day "grace period" to make the payment before having technically defaulted and, in the meantime, is looking to come up with a "consensual" restructuring plan with its bondholders, bankers and other stakeholders.

"The objective here is a restructuring so at the end of this, the bonds aren't going to exist," said one source. "Plan A is you sort out the banks and bondholders and the latter end up owning the great majority of the company. Plan B is someone comes along with an offer that is more attractive."

In addition, Energis confirmed yesterday that its banks had given the company's UK business permission to draw down funds from its existing loan facility. Of its £725m borrowings, it is said to have already used up about £600m.

"We are now in constructive discussions with key constituencies to effect a restructuring of Energis' balance sheet. We believe that this is the best way forward for stakeholders to secure the long-term position of the business," said David Wickham, its chief executive.

Last month Energis said it planned to sell its loss-making European businesses and axe 400 jobs in the UK after warning it would breach certain conditions attached to its bank loans.

National Grid, which founded Energis and which still owns about a third of the company, has made it clear that it is unlikely to ride to its rescue.

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