CSFB a possible Energis suitor

By JAMES MCLEAN
Updated:

 

CREDIT Suisse First Boston has been forced to unveil its presence as a potential bidder for debt-crippled telecoms company Energis to help underwrite potential losses from its holding in the group's bonds, City sources say.

The City suggests that Credit Suisse First Boston's star distressed debt trader David Matlin has accumulated a substantial chunk in at least one series of Energis's outstanding bonds. However, while the bank debt is secured against Energis core British business and assets, the bonds are issued in the name of the group's holding company and are unsecured.

New York-based Matlin is renowned for taking large positions in distressed company debt, earning him a reputation as one of the most powerful vulture investors in the sector. Not all his punts have worked out, but the industry says his wins have more than made up for the losses.

Matlin is thought to have bought the Energis debt at up to 20% of its face value. After a recent default it is currently trading at about 12p in the pound.

'What the bondholders are playing for is the residual value in excess of the bank debt, netted off against any liabilities in Europe and then hoping that it comes out to more than whatever they paid for the debt. My guess is that it doesn't,' said one analyst.

This realisation may have compelled CSFB's private equity team to make its presence known as a potential bidder for Energis. Energis is thought to have drawn down £700m of the £725m available to it in the wake of recent talks with its banks. It also has bond debts of about £565m.

Energis has said it would like to see interested bidders submit proposals for the business by the end of this week, and with the current slide in telecoms valuations there are concerns that unless the bidding becomes fiercely competitive they may be far less than original £1bn estimates.

Energis, which was worth more than £12bn more than two years ago, now has a market capitalisation of only £44m. On Monday it missed a £13.7m coupon on its £300m 2010 issue.

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