Phones 4u Creditors Asked to Form Group for Debt RecoveryJulie Miecamp and Amy Thomson
Phones 4u Ltd.’s administrators told creditors to create a group for debt recovery negotiations after mobile-phone operators including EE Ltd. and Vodafone Group Plc said they weren’t interested in restructuring the company’s debt.
PricewaterhouseCoopers LLP, which was appointed to protect the interests of the U.K. retailer’s stakeholders, found that the phone companies showed more interest in buying parts of Phones 4u, the company said in a call with bondholders yesterday. Noteholders stand to recover as little as 10 percent of their investment, according to Standard & Poor’s, which downgraded the company and its debt today to D, its lowest rating.
EE and Vodafone may buy some of the stores, and will make a decision in the next few days, three people familiar with the matter said, asking not to be named discussing the plans because they are not public. Phones 4u also has about 300,000 phones in stock, some of which may be sold to raise money, one of the people said.
“We, as administrators, need a forum to discuss with you our strategy and our proposals,” Paul Copley, a partner at PwC who is working with the administrators on the case, told bondholders on the call. “We’ll schedule further calls as and when we’re able to do so in the coming days.”
Phones 4u, which is owned by private-equity firm BC Partners Holdings Ltd., sought protection from creditors and shut its stores after Vodafone and EE said they wouldn’t renew contracts ending next year. The deals represented 90 percent of the mobile-phone plans the Newcastle-Under-Lyme, England-based retailer sells.
Phones 4u’s debt includes 635 million pounds ($1 billion) of bonds and a 125 million-pound revolving credit facility, according to data compiled by Bloomberg. The bonds comprise 430 million pounds of 9.5 percent senior secured notes maturing April 2018 and 205 million pounds of 10 percent payment-in-kind notes due April 2019, which give the company the option to pay interest with more debt.
Need for Speed
A deal has to be reached “quickly” to protect the company’s cash balance for parties such as bondholders, who have an economic interest in Phones 4u, administrator Rob Hunt said during the same call. Employees’ wages will be counted as preferred creditors before the bonds, he said.
PwC said that Dixons Carphone Plc’s stores, where Phones 4u had some concessions, would take on the 800 people who worked at those in-store shops. The deal doesn’t include the transfer of any stock or the Phones 4u brand, PwC said today.
While there is a potential buyer for Phones 4u’s insurance business, mobile phone carriers and the unnamed competitor haven’t shown any willingness to buy the company as a whole, according to Hunt.
“If we don’t get positive conversations with these parties over the course of 48 hours, we’ll face little choice but to liquidate,” Hunt said. “This would involve a huge logistical exercise.”
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