Debt restructuring talks between banks and Tiscali

A suspension of interest payments on EUR601 million worth of debt was made in a creditor agreement with Tiscali recently, which will potentially allow the company to stay in business, although it has added that should it fail to reach an agreement on debt restructuring during talks with its creditors its long-term survival will still be at risk.

Following the scrapping of its plans to raise cash by selling all UK assets to BskyB, the broadband operator, which is based in Sardinia, was forced to look for better conditions from creditors earlier this month. The operator confirmed that its March interest payments had not been met.

Citing the agreement by the banks to temporarily suspend the interest payments to be made on its debt, Tiscali said in a statement late on Friday “The board believes conditions exist for a positive outcome on debt-restructuring talks with banks.”

Outlines of a new business plan that it says it is confident will help its debt-restructuring goals to be met were also approved by Tiscali.

Rothschild was hired as a financial advisor and ATKearney as its business adviser. Tiscali advised that as they become available it will be providing further updates on debt-restructuring and details of its new business plan.

It said “The board believes that conditions are in place for the company to stay in business given the improbability of the lack of an accord with creditors. In the latter event, the company’s continued existence would be at risk.”

Its net loss of UER65.3 million a year earlier had widened to a full-year net loss of EUR242.7 million, which had mainly been due to the net interest paid for higher restructuring costs and debt financing said Tiscali.

It also said that its net financial debt, which had been watched closely, had fallen from EUR636.5 million at the end of 2007 to EUR601.1 million at the end of 2008.

Earning before interest, amortization, Ebitda, Depreciation or taxes had increased by 24.1 percent to EUR197.0 million over 2008, with its total number of clients as of Dec 31 reaching 2.3 million, according to reports released by the company on Friday. Over 2007 its Ebitda was EUR158.7 million.