Following on from the previous blog entry, it is interesting that the bondholders tried to mount a rescue by offering a substantial debt to equity swap. Ultimately it appears this has failed. Trying to do this after the business has gone into Administration means it was probably too late to succeed. Such consensual techniques are not generally used once in formal process.
It is an interesting demonstration of what can be possible when lenders are facing an almost total loss of their money. They very rapidly came forward with a solution that was better for them. This is why consensual restructuring techniques so often work and preserve value compare to insolvency.
It also maybe begs the question of why the business entered insolvency so rapidly once EE declared it would not renew its contract in late 2015. That is some way off and couldn’t the business have taken a little time to better explore the alternatives such as a debt equity swap before the decision was taken to enter Administration?
We may never know but if the lawsuits eventually fly then possibly some of the background will be disclosed.
David Bryan – Principal, BM&T
19th September 2014