Energis in crisis talks with banks

BUSINESS telecoms group Energis is locked in crisis talks with banks over whether it can use part of a £725m loan to make an 'orderly exit' from its loss making European operations. The banks are believed to be on the verge of insisting the funds cannot be used outside the UK business. As telecoms gloom deepens, a leading insolvency expert is moving in to advise Energis bondholders.

The banks' move could make it difficult for Energis to honour guarantees to its European operations. It is also due to meet an interest payment on its £565m bonds next week.

Bondholders have appointed John Talbot of Talbot Hughes to represent them. He made his name in the Maxwell collapse as administrator to Robert Maxwell's private companies.

Last month Energis revealed it expects to breach the terms of its banking agreements. It declined to comment on how much cash it has independent of the bank facility. Barclays Capital, head of Energis' banking syndicate, said: 'We remain in dialogue.'

Energis' UK operation makes sales of £750m and an underlying profit of around £170m a year and has attracted interest from venture capitalists such as Apax Partners and Kohlberg Kravis Roberts. But its UK strength could tempt bankers to press for a sale, which would easily cover the banks' debt, but might pose problems for bondholders. Separately, rival Colt Telecom is looking at Energis' Dutch operation.

Energis shares at 3.1p value the group at £53m. At its peak it was worth £12bn.

Others face problems. NTL has £12bn debt and admits it cannot continue in its present form. Rival Telewest has £5.1bn debt and broker Merrill Lynch says it needs a further £340m to survive.