Wind Hellas recently spoke to 29 potential bidders in an attempt to sell the overleveraged Greek telecoms operator, but only two have shown any real interest. Both have a pre-existing interest in the company: they are its junior creditors and current shareholders. Neither has come up with a solution to Wind’s problems.

Wind is in deep trouble. It has 3.2 billion euros of debt after being acquired by Weather Investments in 2007, the holding company controlled by the Egyptian entrepreneur, Naguib Sawiris.

Wind has been hammered by falling revenues in the Greek telecommunications market. It has responded by cutting costs sharply, but while this has conserved cash, it has also dented competitiveness and hit market share. The group is now unable to meet the 250 million euro annual interest charge on its debt. Free cash flow over the last 12 months only amounted to 213 million euros.

Much of the existing capital structure looks to have been wiped out. Assuming a generous multiple of 5.5 times this year’s forecast earnings before interest, tax, depreciation and amortisation (EBITDA) of 320 million euros, and you get an enterprise value of 1.76 billion euros. Wind’s senior creditors have a claim of 1.8 billion euros against the company. That then suggests that the 1.4 billion euros of junior debt and the equity are worthless.

The prospect of extinction has concentrated the minds of Weather and the junior creditors wonderfully. But neither has concocted a plan that really solves the company’s financial problems.

Weather is offering to put up another 150 million of new equity, on the condition that the junior creditors are squeezed out. The junior bondholders’ plan is reported by Reuters to involve a cash injection of at least 117 million euros. Were it to be accepted, they would swap their debt for a combination of equity and pay-in-kind notes, giving them control of Wind. Both proposals would leave the senior creditors whole.

Either plan would reduce the cash interest requirement by about 112 million euros a year (although the senior creditors may demand a step up in their interest payments for agreeing to the deal). But Wind would remain extremely highly geared, with precious little free cash flow to invest in growth areas. The company has already fallen behind on its capital expenditure and is warning that without an extra burst of catch-up spending its competitive position is likely to suffer further.

It suggested in August it will need to spend 17 percent of next year’s revenues — or roughly 180 million euros — a year for the next two years to catch up, against the 120-140 million it plans to spend this year. Add that cost to even the lower interest charge and you would need an annual EBITDA of about 310 million euros to cover them, compared with the forecast EBITDA of 320 million.

The winning bid will likely come down to which of the two camps presents the most credible plan, and who has deep enough pockets to fund the company’s liquidity and investment needs. Sawiris wants to keep the existing management team in place, while the bondholders are saying they would bring in a new boss.

Both plans however have an interim feel. By offering to overpay for Wind now, its current stakeholders may be avoiding more severe losses, and holding onto the hope that the business will recover. But with Greece’s economy still flagging, this may not be the last financing that Wind Hellas requires.