Bondholders threaten to scupper venture capital bid for Energis

Bondholders in the troubled telecoms company Energis were pushing yesterday for the company to carry out a debt-for-equity swap and were said to be threatening to block a bid from a consortium of venture capital houses that could see them walk away with next to nothing.

The company, which has been in restructuring talks for the best part of this year, is hoping to thrash out a deal this week to secure its future, either through accepting an offer for its UK operation or carrying out a debt-for-equity swap.

"A number of them [bondholders] have been saying that [they want to see a debt-for-equity swap]. The question is whether they mean it or whether they're using that as a means of increasing the money from the venture capitalists," one source said.

Three venture capital firms, Apax Partners, Carlyle and Permira, are expected to table a formal bid for the company in the next few days. It is unclear what the offer will comprise, but speculation is mounting the trio will make a bid worth less than the company's £690m of debt.

As part of their offer, they are said to be considering asking the company's banks not only to write off about £100m of loans but also to continue to provide an ongoing debt facility.

The company's bondholders, however, are said to be threatening to block such a deal in favour of pushing through a restructuring plan of their own. "They [bondholders] are perfectly capable of blocking a venture capital bid but if they do, they have to come up with a credible debt-for-equity-swap," the source said.

A joint proposal from the trio of venture capital houses could come as early as today.

"You're bound to get people pushing their own agendas. The venture capitalists want to get hold of it [Energis] for as little as possible. The banks want to make sure their position is not impaired and bondholders want the best deal for themselves," the source said.

Any bid put forward by the venture capitalists would need the approval of the company's bondholders. If a bid were blocked, however, Energis' banks be able to send the company into administration.

Energis ran into trouble this year after a deterioration in trading forced it to admit it was in danger of breaching its banking covenants. It has since pulled the plug on both its German and its Swiss operations but is is continuing to support its business in the Netherlands.

Energis admitted last month that "constructive discussions" with banks, bondholders and potential investors were proceeding towards either a recapitalisation or a sale of the UK business.

The company warned then, however, that either route would lead to "significant" dilution for the company's existing shareholders. It refused to comment last night.