Ionica seeks refinancing

IONICA, the wireless telephone operator, is attempting to ease its financial troubles by replacing a pounds 300m loan facility with a mixture of third-party finance, high-yield debt and fresh equity.

The company's shares have collapsed since its stock market flotation last July and it will not be able to draw on the credit facility because it is in breach of its banking covenants.

Instead of revising the terms of the facility with its financial backers, Banque Paribas, SBC Warburg, Societe Generale and Nortel, Ionica is likely to seek other forms of funding to complete the roll-out of its fixed radio access network.

The build-out of the network will cost pounds 1.5bn and is not now expected to be complete until 2004 - four years later than the timescale set down in Ionica's licence.

Ionica has pounds 100m in cash available to continue installing base stations but it will need new financing by the latter part of this year. Details of the new financing plans are due to appear in the summer as part of a strategic overhaul of the group launched by its new chief executive Michael Biden.

So far, Ionica has rolled out 10 per cent of the network and has installed 250 base stations in three regions - East Anglia, the Midlands and Yorkshire. The company, which had 35,000 customers at the end of the third quarter, is aiming for 2 million subscribers and is concentrating its efforts on those areas where it has launched a service.

Mr Biden said he believed Ionica could attract 500,000 customers in the three areas where it is operating and said a new software upgrade, which will double its capacity, was on schedule to be installed from this May.

He was speaking as Ionica pledged that it would match the latest series of price cuts by BT, which is reducing the cost of night time weekday local calls by 10 per cent next month.

Ionica shocked the market last autumn by disclosing that the software upgrade had been delayed and its roll-out programme was behind schedule. Since then the shares have plunged to 70p from their flotation price of 390p, wiping pounds 525m from Ionica's value.

Mr Biden said Ionica was also looking at the possibility of piggy-backing on base stations already installed in other parts of the country by other operators and offering space on its own base stations to third parties.