Energis shares face new blow

SHAREHOLDERS in embattled telecoms group Energis were facing the prospect of massive dilution today as the company prepared to offer its bondholders a huge debt-for-equity swap.

The group said yesterday it was unlikely to be able to comply with terms agreed in November on its £725m banking facility, which was led by Barclays, Bank of America, WestLB and Dresdner Kleinwort Wasserstein.

Energis is understood to have drawn down about £600m of that facility but is not thought to have access to the remaining portion of that loan at this time.

Current working capital within the business is believed to be between £20m and £50m.

The credit committees of the leading banks are likely to report back in about two weeks on their preparedness to support the troubled business. That will bring the firm perilously close to the next coupon payment due on parts of £566m of outstanding bonds on 15 March.

Merrill Lynch said today that the prospect of default on the bonds would allow bondholders to 'assume ownership of the company, leaving the existing equity virtually worthless'.

Energis shares today sank a further 1p to 3p, leaving the group, once worth £12b, valued at just over £50m.

Meanwhile, major Energis clients internet providers Freeserve and AOL said they had contingency plans in place to ensure their combined user base of nearly three million would be unaffected by the group's financial woes.