Energis on the brink as sale is sunk

TROUBLED telecoms company Energis faces receivership this week. Bankers and bondholders now admit there is little chance of selling its assets to recover the money they are owed.

Creditors are this weekend trying to persuade venture capitalists Apax Partners and Carlyle Group to increase the £600m they have offered for the British operating arm of Energis. But City sources admit that the chances of a deal have shrunk to almost zero. One said: 'The banks will go it alone. This means in practical terms that a brief period in the hands of the receiver will be needed.'

The company has an overdraft of £690m as well as debts to bondholders. Receivership would see the banks, including Barclays Capital, seize the operating arm. The banks have been keen to strike a deal with the venture capitalists as this would mean they would not have to write off their loans as bad debts. Bondholdersare less keen because they do not want to lose control of the company's major asset, its British business, which still makes money.

A source close to negotiations told Financial Mail: 'The banks would have to write down their loans in the event of receivership, but they could justify this to their boards on the basis that the British arm is still generating cash, though not enough to cover all the debts.'

That would leave them with an asset they could sell. Senior insiders said Energis revenues in April and May were strong, and since then earnings have been ahead of expectations. But industry sources believe customers are jittery and are increasingly transferring their business to rivals, especially BT.

Receivership is by far the most likely outcome. The main issue now confronting company executives is how to handle such a move smoothly.