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 – i.e. to hold firm and not to trade their debt – 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 – i.e. nothing.
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According to Reuters, ”Junior lenders are currently battling the bank proposals on McCarthy & Stone and are threatening to take senior lenders to court if they are offered nothing.”
The amount of potential egg on face is rather high – the junior debt runs to a total of £150m. This is made up of:
ВЈ40m of second lien ВЈ110m of mezzanine debtShould 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 – 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 “standstill agreement” with its lenders after missing December’s payments.
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