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By Robert Smith
LONDON, Sept 24 (IFR) - Phones 4U's bonds held steady onWednesday morning, brushing off a caution from the company'sadministrators on the ebbing chances of future store sales.
The company's £430m 9.5% 2018 senior secured notes traded upearlier this week after it emerged that mobile operators EE andVodafone had agreed to buy some of its stores out ofadministration.
"After killing it, they're picking over the carcass for thegood bits," said one high-yield investor.
The cash price bid on the bonds shot up more than sevenpoints to 37.75 following the news, as it improved the prospectsfor bondholder recoveries.
The company's administrators at PwC held a third call withbondholders on Tuesday afternoon. Paul Copley at PwC said thatthey are still talking to many interested parties about buyingfurther stores, but that it is "highly unlikely" they will sellas many as they did to EE and Vodafone.
"I would manage down your expectations on any material valueexpected to come from that exercise," he added.
Sky News reported earlier on Tuesday that Phones 4U's rivalDixons Carphone is interested in acquiring 50 to 100 stores, butthat it intends to negotiate directly with the properties'landlords once they have been closed down.
The bonds slipped slightly following the call, dropping froma bid of 36.5 to 35.125 according to Tradeweb, but has sincerecovered back to around 36.5 on Wednesday morning.
The bonds were bid as low as 8 last week, according toTradeweb, but a restructuring lawyer said they knew onedistressed debt buyer that bought in for as low as 5.
The lawyer said that if the debt-for-equity swap proposed bysome bondholders had occurred the bonds would have traded downsubstantially, as it would "open a real Pandora's box."
The reduced chance of further store sales was not the onlybad news for bondholders on the latest call. Copley also saidthat bondholders do not appear to have security over Phones 4U'sLIFE mobile business.
LIFE is a virtual mobile network that piggybacks on the EEnetwork, and is primarily aimed at customers who have beenturned down by the other major networks for credit reasons.After a preliminary assessment, however, Copley said that itlooked as if any realisations from LIFE will pay that company'screditors ahead of Phones 4U's bondholders.
Finally, Copley said that no bondholders had chosen to learnprivate information yet, as doing so would restrict theirability to trade the bonds. Copley said that a private forum forbondholders will be needed, however, if they wish to pursuelitigation for clawback claims from the company's private equityowners, directors or the mobile operators. (Reporting by Robert Smith)
