Austria's Verbund wants "Italian solution" for debt-laden Sorgenia

VIENNA Wed May 7, 2014 7:35am EDT

VIENNA May 7 (Reuters) - Austrian utility Verbund , which holds a large stake in energy group Sorgenia, said the firm's Italian majority owner and creditor banks must find a solution to its debt problems.

Italy's Sorgenia, 52 percent owned by Italian holding company CIR, ran up 1.8 billion euros ($2.5 billion) of debt by investing heavily in gas-fired power plants that proved expensive to run when the economic downturn hit demand and prices.

CIR and Verbund, which has a 46 percent stake, are meeting the energy group's creditor banks on Wednesday to discuss a restructuring of 600 million euros of debt that must be cleared in the short term to keep the company afloat.

Loss-making Sorgenia owes money to about 20 Italian and foreign banks that have proposed a deal to convert 400 million euros worth of debt into equity. Another 200 million euros would be refinanced through a mandatory convertible bond the banks would buy.

Verbund confirmed it was taking part in the talks but has said on several occasions it is not prepared to inject more money into Sorgenia.

"We support an Italian solution," a spokeswoman said, without elaborating.

Verbund has offered to sell its stake, which it has already written off in its own books, as its contribution to the rescue. The spokeswoman declined to comment on what interest, if any, the company's offer had attracted.

CIR, owned by business family De Benedetti, has previously said it is not ready to increase its stake in Sorgenia.

A source close to the matter told Reuters last month the banks had made any debt-to-equity swap deal conditional on Sorgenia shareholders backing it unanimously.

Sorgenia's main creditor is bailed-out Italian lender Banca Monte dei Paschi di Siena. Others include Intesa Sanpaolo, UniCredit and Mediobanca.

($1 = 0.7177 euros) (Reporting by Alexandra Schwarz-Goerlich; Writing by Georgina Prodhan; Editing by Pravin Char)

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