BT said on Monday it will acquire TalkTalk's wholesale and consumer businesses through a pre-pack administration, after efforts to sell them as a going concern fell short. The transaction is on a debt-free basis, which means the capital structure takes a hit: holders of about £628 million of first-lien bonds and around £332 million of second-lien notes were wiped out. Bloomberg pricing indicated that, roughly one month earlier, those first-lien bonds traded around 65% of par value. A BT spokesperson declined to comment.
For Ares, consenting to the sale came with a cash consideration of roughly £100 million in exchange for relinquishing its security, people familiar with the matter said. When you stack that with interest and prior repayments received over time, the math points to an overall recovery of about half of its invested cash.
Ares first took a £50 million minority stake during the opening months of 2021, participating in the Toscafund Asset Management and Penta Capital-led buyout that was backed by TalkTalk founder Charles Dunstone. From there, it put more money to work up and down the capital structure, ending up as both a senior and junior creditor as well as a shareholder, using several of its managed vehicles.
One notable element: filings show a payment in kind facility was extended to a TalkTalk holding company to help finance the take-private. PIK terms let borrowers add interest to the loan balance instead of paying cash, and after netting earlier repayments the amount due to Ares swelled to more than £600 million, based on filings and Bloomberg calculations. Counting accrued interest, Ares' total exposure to the company amounted to about £1 billion.
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In 2024, Ares led nearly £235 million of fresh funding, with other shareholders also putting in equity, as part of an agreement with creditors aimed at pushing out maturities while TalkTalk sought breathing room in talks with Macquarie Group about a potential sale of the wholesale unit. Those negotiations ultimately went nowhere.
Subsequently, Ares and other lenders arranged about £72 million of so-called 1.5 lien debt, which sits between first- and second-ranking claims in a restructuring. Last March, with no sale in sight and problems mounting, Ares joined a £65 million super senior facility that would be first in line if insolvency occurred. The PIK obligation sat further from the operating assets, so it ranked behind operating company debt and carried lower repayment priority.
In the latest sale process, Ares put in a proposal for the consumer arm, while private equity firm Epiris targeted the wholesale side, according to people familiar. BT ultimately ended up with both divisions.
Ares said in an emailed statement that recovering a "substantial portion" of the principal invested reflects "the strength of our structured contractual rights and the quality of our portfolio management capabilities." Still, the outcome underscores how fast recoveries can shrink when leverage is high and repayment priority moves against you. UK telecoms have been navigating a costly shift from copper to fiber amid tough competition, and several players have had to rework their debts as customer numbers and cash flow came under pressure.
For anyone watching from the sidelines, the takeaway is simple: where you sit in the stack and how terms compound over time can matter more than headline amounts. Ares' exposure reached roughly £1 billion, the amount due after repayments ballooned past £600 million, it received about £100 million to clear the way for BT, and it expects to end up with around 50% back. In a distressed sale, those positioning details tend to decide the final score.
Fifty cents on the dollar is a useful benchmark to remember. Get the free Market Briefs daily newsletter and follow the workouts.
