Telecoms company Thus is working on financial restructuring plans to position itself to buy undervalued rivals.
It is understood that ScottishPower, Thus's parent company, which owns 50.1 per cent, is considering taking on some of Thus's debt in return for equity. This would allow Thus to use its shares to make acquisitions in the bombed-out telecoms sector.
At present, ScottishPower faces a hefty capital gains tax bill if its stake in Thus is diluted. By increasing its stake in return for debt, Thus can issue more shares without inflicting any tax penalties on its parent.
Malcolm Stephen, telecoms analyst at Deutsche Bank, said: "Any structure to reduce Thus's debt would help make the company a more attractive proposition."
It is thought that ScottishPower could take up to £90m of Thus's borrowings.
Unlike many of its rivals in the alternative telecoms market, Thus is fully funded until the second half of next year. It is to make a major announcement on its future financing arrangements by March 2002.
ScottishPower last week reported a drop in first quarter pre-tax profits to £105.3m, from £137.6m in the similar period last year.Reuse content