(Reuters) – Telecom and media tycoon Richard Li’s private equity fund may lose control of a debt-laden Bulgarian telecommunications operator as junior lenders are battling to take it over, a newspaper reported on Tuesday.
Vivacom, Bulgaria’s biggest fixed-line operator, was set to breach agreements on its 1.64 billion euros ($2 billion) in loans by the end of the month, the South China Morning Post reported.
Controlling shareholder PineBridge Investments, the buyout firm owned by PCCW Ltd (0008.HK) Chairman Li, wanted to restructure the company’s debt in a deal that would cause the so-called mezzanine lenders to lose all of the 325 million euros they are owed, the newspaper said.
The debtholders, including U.S. hedge fund Tennenbaum Capital Partners and French insurer AXA’s (AXAF.PA) private equity arm, wanted to take a majority stake in the company by swapping their loans for shares, the newspaper said, citing people involved in discussions.
High-interest mezzanine debt carries limited legal rights in debt restructurings, but these lenders insisted they had a stronger position than PineBridge, the paper said.
Li took control of Vivacom when he bought PineBridge from U.S. insurer American International Group Inc (AIG.N) in March. The fund lead a consortium that invested 460 million euros in Vivacom in August 2007.
Royal Bank of Scotland (RBS.L) and Deutsche Bank (DBKGn.DE), which lead a group of senior lenders owed 1 billion euros by Vivacom, would judge who wins the fight and make a decision by the end of this week, a person involved in the talks told the newspaper.
As Vivacom’s senior lenders want the 1 billion euro debt cut to 800 million euros, PineBridge has asked the banks to write off 200 million euros from their debt load.
A group of so-called “second lien” lenders, owed 200 million euros, had been asked to exchange their debts for Vivacom shares, but PineBridge had not proposed giving the mezzanine lenders anything, the report said. ($1=.8182 Euro) (Reporting by Maggie Lu Yueyang; Editing by Chris Lewis)