LONDON, Feb 22: British telecommunications group Energis teetered on the edge of bankruptcy on Friday after its debt rating, already at junk bond status, was slashed again and its shares resumed their freefall.
Like many telecom companies, Energis is sinking under the weight of debts run up buying companies during the telecoms boom of the late 1990s.
Once a high-flyer of the so-called “new economy,” Energis has endured a dramatic fall from grace that has seen its share price plunge by over 99 per cent.
Energis shares fell by as much as 40 per cent in early trading here on Friday before clawing back to 3.25 pence, down almost 20 per cent on the day. That followed a 70pc fall on Thursday.
“You pay your money and you take your choice. It’s option money: could go bust, could double,” said Jeremy Batstone, head of research at NatWest Stockbrokers.
The latest crisis to hit the British telecoms industry unfolded after Energis, the biggest Internet carrier in Britain, said it did not expect to be able to meet its borrowing commitments and entered crunch talks with its banks.
Telecoms companies such as Energis, Marconi and Colt Telecom are all nursing hefty holes in their balance sheets left as a legacy from expansion drives during the telecoms boom times.
“The combination of rapid expansion, fulled by high levels of borrowing and dubious cash generative qualities, meant that when the bubble did burst they were going to be very very exposed,” said Batstone.
Energis, which was spun off by electricity network operator National Grid in 1997, boasts “a significant presence” in Britain, Germany, the Netherlands, Switzerland, Ireland and Poland.—AFP
