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The team approach to distressed debt

Deal: Cablecom's debt-for-equity swap
Size: SFr3.8 billion ($3 billion)
Adviser: Goldman Sachs
Date: November 13 2003

Various US investors have made their presence felt in Europe by buying into distressed debt there in the past three years. But how much more impact might they have if they started teaming up and acting together?

That was what happened in November when Apollo Management, Soros Private Equity Partners and Goldman Sachs Capital Partners took control of Swiss cable TV company Cablecom.

Frosty response Cablecom supplies cable services to about 1.5 million households and employs 1,300 people. All three investors had been buying Cablecom's debt as it struggled with a high level of borrowing. During 2002, Cablecom worked with a group of 38 banks to restructure its SFr3.8 billion ($3 billion) of bank debt, which was almost fully drawn.

By February 2003, with some banks nursing substantial losses, a deal was struck whereby some of the existing debt would be written down and each bank would get a chunk of Cablecom's equity.

But Apollo, Soros, and Goldman, as investors in sub-par debt, thought that Cablecom would have problems servicing what would be left of its debt, which even after the proposed write-down would have been more than SFr2 billion.

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