Sorgenia creditor banks consider debt-for-equity deal -sources

MILAN Tue Feb 25, 2014 12:25pm EST

MILAN Feb 25 (Reuters) - The creditor banks of Italy's Sorgenia could convert some of the debt they hold in the troubled energy company into shares as it battles to stay in business, sources close to the matter said on Tuesday.

Sorgenia, for years the main asset of the De Benedetti family's holding group CIR, invested heavily in modern gas-fired power plants just as Italy's sharp economic downturn undermined power demand and bit into margins.

Once CIR's pride and glory, loss-making Sorgenia has run up 1.8 billion euros ($2.47 billion) of debt, 600 million euros of which must be cleared to keep it afloat in the short term.

The creditors have been cranking up pressure on CIR to stump up 300 million euros and are now considering a fresh approach to encourage it to play ball.

"A debt-for-equity deal is one of the options on the table, but it's early days yet and there's still some way to go," one banking source said.

CIR, which also controls publisher L'Espresso, has called on the banks to grant Sorgenia a freeze on debt repayments, adding that the business can survive for only one month if suspended credit lines are not reopened.

"The family is only ready to inject a third of what the banks want. One idea some lenders are looking at is to get it to put 150-200 million euros in cash and then consider some kind of debt-for-equity deal," a second banking source said.

CIR declined to comment.

Sorgenia owes money to about 20 Italian and foreign banks. Its main creditor is the troubled Banca Monte dei Paschi di Siena. Other creditors include Intesa Sanpaolo , UniCredit and Mediobanca.

UniCredit's CEO on Tuesday said that debt-restructuring talks with the company are still in an early phase.

Italy's banks, struggling with non-performing loans, have converted debt into shares of other troubled companies, including real estate group Risanamento.

The De Benedettis, one of Italy's most prominent business families, founded Sorgenia in 1999 to take advantage of Italy's liberalising energy markets.

Austrian utility Verbund holds 46 percent of the company but has written off the value of the stake and said it is not ready to inject any more cash into the venture.

To help with debt restructuring, Sorgenia has said it will sell all its renewable energy assets as well as its exploration and production business.

Sorgenia's banks, which met on Monday, are scheduled to reconvene on Wednesday, two sources said. ($1 = 0.7282 euros)

(Reporting by Stephen Jewkes; Editing by David Goodman)