Marconi creditors plan carve-up

BANKS and bondholders owed £4bn by Marconi are hatching plans to seize control of the core of the stricken telecoms equipment company - leaving ordinary shareholders with nothing.

They are looking at ways of taking over Marconi's finance arm, Marconi Corporation, used by the company to issue its debt. They believe it has a claim over Marconi's operating subsidiaries, which it has funded, so if they win control they would effectively own Marconi's businesses. This would be a blow to Marconi chief executive Mike Parton because it would leave the holding company, in which ordinary investors have their shares, owning few if any assets.

Banks and bondholders are thought to be checking whether they have a legal claim on Marconi Corporation, perhaps via a debt default. This would usually be regarded as extreme, but that it is being considered shows the yawning gap between the firm and its lenders.

The Bank of England is thought to be trying to keep the peace in its role as unofficial arbitrator under the 'London Rules' code of conduct for big companies that face problems with creditors. The Rules, dating back to the Twenties, are overseen by the Bank and are designed to ensure that banks are patient when dealing with corporate borrowers, instead of rushing to call in the administrators.

Tensions still run high between the two sides, with the lenders balking at the current restructuring plan requiring them to write off debts of £1.4bn.

A source close to the negotiations said: 'The banks do not want to write off that level of debt and they are considering almost any way of avoiding it.'

Marconi strengthened the team negotiating the refinancing last month by appointing Allen Thomas, who helped bail New York City out of its financial crisis in the Seventies, as a non-executive director and restructuring expert Talbot Hughes as adviser.

Even if the lenders do agree to Marconi's rescue plans, the ordinary shareholders are likely to see their holdings heavily diluted as the company swaps most of its debt for new shares in the business.