Holders of £430m (US$701m) of Phones 4u’s senior secured notes have been told that their proposal to write down a significant part of their debt and restructure the reseller’s capital structure is not a realistic option for the stricken…
Holders of £430m (US$701m) of Phones 4u’s senior secured notes have been told that their proposal to write down a significant part of their debt and restructure the reseller’s capital structure is not a realistic option for the stricken business.
Administrator PwC said it was unlikely a debt-for-equity swap would be viable and that instead it was pursuing a sale of Phones 4u’s assets.
Speaking on a call with bondholders, a PWC representative said it was in talks with a range of parties for Phones 4u’s core business, and that conversations were “most live” with three parties.
PwC said it hoped that interest from at least one of the three bidders would result in a transaction in the coming days, and said that assets could be sold off piecemeal to different buyers.
Dixons Carphone, EE and Vodafone have all been reported to be interested in the assets in recent days.
A group of Phones 4u’s bondholders had presented a plan to rescue the retailer after it went into administration at the start of the week.
Phones 4u fell into financial difficulty after network operators EE and Vodafone decided not to renew their contracts with the company.
The bondholders had said they were prepared to take a substantial write-down on their debt to reorganise Phones 4u so that it can meet the lower commercial terms EE and Vodafone had proposed.
Louise Verrill, a partner at Brown Rudnick which is acting on behalf of the bondholder group, had said: “We have proposed a restructure of the business that means the capital structure will no longer be an impediment to achieving the commercial outcome which allows the company to continue as a going concern.”
Phones 4u’s private equity-owner BC Partners has already recouped its investment in the retailer. In September 2013, Phones 4u issued £200m (US$327m) PIK toggle notes to pay BC Partners a one-off dividend, which was topped up with a further £25m in cash. This paid off all of BC Partners’ initial equity used to buy Phones 4u and the firm has made a 30% profit on its investment.
When Phones 4u went into administration earlier this week, it said EE’s decision not to renew its current contract, which is due to end in September 2015, was a “complete shock” and meant it would be left without a single network partner after Vodafone said earlier in September that it would not extend its agreement.
