They face the prospect of being left with a zero value on their ВЈ200m of unpaid loans should the company succeed in its plan to roll itself up and simply morph into Newco M&S.
All 60 senior debt-holders are supportive and are talking sweetly, agreeing to a lock-up вЂ“ i.e. to hold firm and not to trade their debt вЂ“ in order to see M&S into the courtrooms where it would get official blessing for pre-pack administration, walking out as Newco M&S within a matter of hours.
Junior lenders are less than amused as they would be left in the cold with Rump M&S вЂ“ i.e. nothing.ADVERTISEMENT
According to Reuters, вЂќJunior lenders are currently battling the bank proposals on McCarthy & Stone and are threatening to take senior lenders to court if they are offered nothing.вЂќ
The amount of potential egg on face is rather high вЂ“ the junior debt runs to a total of ВЈ150m. This is made up of:ВЈ40m of second lien ВЈ110m of mezzanine debt
Should the plans be de-railed there is a loophole in the loan documentation which states that M&S will have to pay ВЈ30m-ВЈ40m of costs if there is a dispute between senior and junior lenders, sources close to the talks told Reuters.
The prospects for the junior debt-holders can be measured by the value of their pieces of paper вЂ“ in secondary loan trading the pricing-in of the latest proposals led to bids on second lien tranche lifting to 2.3% of face value (well, at least that was up from just 1% before).
Mezzanine, however, was left unchanged at 1%.
M&S started talking to its lenders in August last year. Its problems got steadily worse and it reached a вЂњstandstill agreementвЂќ with its lenders after missing DecemberвЂ™s payments.
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