Bingham Dana has secured the first meeting between ailing technology giant Marconi and company bondholders.
The company, which is being financially restructured, owes its bondholders a total of around £2bn. It also owes its bankers, including Barclays and HSBC, £3.6bn. The company is talking to the banks, but bondholders, including those represented by Bingham Dana, have been frozen out of restructuring discussions.
Bingham Dana represents a group of 10 bondholders holding $850m (£602.28m) face amount of Marconi bonds. The 10 bondholders instructed Bingham Dana last month. Partner James Roome, who is leading a London and New York-based team, has been pressing Marconi for this meeting.
Marconi's share prices have dropped from a year-high of 874 pence to a lttle less than 39 pence as a result of two profit warnings issued this summer. It is renegotiating its debt with its bankers, and bondholders are worried that the restructuring could result in their priority slipping behind that of the banks. Roome believes that the bondholders have been treated unfairly, as Marconi sees its relationship with the banks as more important.
“The company has cosied up to the banks and ignored the bondholders because of the nature of the debt”
James Roome, Binghams
“The banks and the bondholders have an equal status,” said Roome. “The company has so far cosied up to the banks and ignored the bondholders because of the nature of the debt. By definition, bonds are only lent once, but the banks could potentially lend Marconi more.”
In the past, the banks have lent Marconi money to keep it afloat. In 1998, HSBC and Barclays arranged a £4.6bn syndicated loan to Marconi. The loan included a material adverse change (Mac) clause, allowing investors to withdraw the facility if the value of the company went down. Marconi has stated that it will not draw on the remains of the facility, which it was planning to do in 2003, without the banks' consent. This implies the facility has not exactly been withdrawn, says Roome, making the Mac clause irrevelant.
Roome said: “The Mac clause is not relevant anymore, as the company has agreed not to draw on the syndicated loan without the consent of the banks.” He added that Marconi has not given the banks preferential treatment because of its fear of the Mac clause, but because it wants a good relationship with them in the future.
Marconi is being represented by Allen & Overy's David Morley while Clifford Chance's Nick Frome is advising the banks. Both magic circle firms acted on the original syndicated loan to Marconi.