RLPC-Orion Cable restructuring debt to avoid loan breach-sources

LONDON, June 1 (Reuters) - Lenders to privately-owned Orion Cable GmbH have formed three steering committees to restructure the German cable TV services company's debt and pre-empt an expected loan covenant breach, banking sources said on Monday.

Orion Cable, formed in 2007 through the merger of EWT and Tele Columbus, is struggling under a heavy debt load that would have caused it to breach covenants within the next 12 months, two bankers said.

Senior, mezzanine and payment-in-kind (PIK) lenders recently formed three steering committees in preparation for a debt restructuring, they said.

"The idea is to be pre-emptive. The company does not currently have a liquidity issue," one banker close to the deal said.

Lazard has been appointed to advise Orion Cable and produce information allowing lenders to assess the viability of the business, including analysis of the company's liquidity and a new business plan, both bankers said.

The business review will be produced in around a month and will be signed off by Roland Berger consultancy, one of the bankers said, adding Price Waterhouse Coopers was acting on behalf of the senior and mezzanine lenders.

Orion took out 1.665 billion euros ($2.37 billion) of loans in a 995 million euro senior and mezzanine loan in February 2007, which was followed by a 365 million euro PIK loan, according to Thomson Reuters LPC data.

Some of that debt was repaid with the proceeds of Orion Cable's sale of its cable network assets to Kabel Deutschland (KDG) in April 2008.

The sale was however subject to a price adjustment mechanism that delayed the debt restructuring. Orion's 585 million euro sale price was reduced by 67.5 million on May 26 and had to be repaid to KDG.

"Resolving the sale price issue with KDG created a balance sheet problem and delayed a debt restructuring, but Orion is not showing a massive drop off in business," the second banker said.

Orion will repay KDG 50 million euros through funds held in an escrow account, and will fund the balance through a mix of cash on its balance sheet and drawings under its revolving credit, he said.

Orion Cable now has around 650 million euros of senior and second lien debt and 265 million of mezzanine loans, excluding the PIK loan, the banker close to the deal said.

The senior debt was arranged by ING, Bank of Ireland, NM Rothschild & Sons and Rabobank, according to TRLPC data.

Orion's mezzanine steering committee consists of Alcentra, Avenue, Alpstar and Anchorage and EOS is a PIK lender, the two bankers said.

Orion Cable was formed by a series of mergers and is owned by a consortium of private equity funds -- Aletheia Capital Partners, ABN AMRO Ventures, Kingsbridge Capital Management and Quilvest. Alcentra and Societe Generale are mezzanine investors, the first banker said.

The restructuring is designed to bolster Orion Cable's liquidity position and allow the sponsors to exit on better terms. However, joint ownership may complicate the restructuring and make it difficult to inject new equity, both bankers said.

The consortium does not have deep pockets and could face an uphill struggle to retain control of Orion as there is enough interest from other investors willing to put money in, they said.

"It doesn't look like the equity guys have a lot of cash to put into the business and could lose the company," the second banker said. (Reporting by Tessa Walsh; Editing by Dan Lalor) ($1 = 0.7026 euro)