Marconi is poised to proceed with a debt-for-equity swap in a move to restructure its balance sheet, London-based telecom analysts say. The move would involve bondholders eventually swapping their debt for shares. The increased likelihood of the swap comes after Moody's Investors Service downgraded Marconi's debt from B2 to Ca last week. "We've been very negative on this situation since last year and it is clear some sort of restructuring will take place, most likely a debt-for-equity swap," says Aizaz Shaikh, a telecom analyst at BNP Paribas.
Even though a restructuring will likely result in a loss for bondholders, Bear Stearns' Louis Landeman is maintaining a hold recommendation on the bonds at current levels in the low E30s. Marconi and its creditors should have an interest in keeping the company afloat at least through the restructuring process, he says. Given that Marconi still has a large amount of cash on its balance sheet and its remaining assets should have some value, should give bondholders some recourse. Landeman also anticipates a debt-for-equity swap.