Banks grab Energis from brink

LONDON, England -- Energis, once Britain's biggest Internet traffic carrier, has sold itself to creditor banks to avoid collapse because it was unable to pay debts.

The company, which was worth about £14 billion ($22 billion) at the peak of the telecom boom, has been pushed to the brink of financial ruin because of overcapacity in the telecom industry.

A number of banks -- including Barclays Capital, J.P Morgan Chase and Royal Bank of Scotland -- take control for a £150 million cash injection. Energis owed the banks about £700 million.

Energis would not say how much debt the new company Chelys -- formed to takeover Energis -- would take on and analysts wondered if this would be restructured.

"Clearly the company had a lot of leverage and as stakeholders, the banks and bondholders will probably want to reduce leverage so they don't go through all this again. But until we know how much bank debt there will be, it's hard to assess recovery values for bonds,'' a distressed-debt analyst in London told Reuters.

Chelys will be chaired by Archie Norman, a Member of Parliament for Britain's opposition Conservative Party and former chairman of supermarket group Asda.

Energis shares were trading at just over one penny on Tuesday before they were suspended on the London Stock Exchange pending Tuesday's statement. The company said it did not expect the shares, which were worth 60 pence in January, to resume trading.

Shareholders in Energis will have an ongoing interest in Chelys, with rights to 7.5 percent of any value over £1.8 billion should it be sold or floated again within 7 years.

Energis was formed by Britain's National Grid, the former state-owned electricity transmission monopoly, in 1993 as a provider of telecom and data services to businesses via a UK-wide fiber-optic network.

The company, which helped launch Britain's largest Internet service provider Freeserve, spent about £1 billion acquiring European business -- including Unisource Carrier Services, Dutch network operator EnerTel, German ISP BusinessOnline and web hosting company ISION, which filed for bankruptcy in May.