Debt-laden British telecoms firm Energis has sold its core UK business to its lending banks, in a deal which gives the ailing company a new lease of life.

Under the agreement, the company's UK arm, which will continue to trade under the Energis brand, will be run by Chelys, a buy-out vehicle set up by the banks.

Chelys, headed by former Asda chief executive and Conservative MP Archie Norman, has agreed to pump about �150m into the company.

The banks' decision to buy out Energis is being seen as a sign of confidence in the firm's business model.

They had earlier considered selling the company at a knock-down price to a private equity partnership.

New beginning

The move breathes fresh life Energis, which had looked set to collapse under the weight of a �700m debt burden.

The deal also offers the company's long-suffering shareholders and bondholders a chance to get some of their money back, provided the revitalised firm performs well enough to clear its bank debts first.

Energis' market value, which peaked at about �14bn at the height of the late 1990s technology boom, had sunk to just �16m on Tuesday morning, with shares changing hands at one penny.

Energis, formerly part of electricity group National Grid, borrowed heavily during a phase of rapid expansion during the late 1990s.

Bubble bursts

But it struggled to pay its debts after telecoms capacity prices slumped when it became apparent that rapid network-building by other operators had caused a supply glut.

The company's share price, already down sharply from its peak, fell heavily earlier this year when it told investors that it was in danger of breaching its bank loan terms.

Energis tried unsuccessfully to sell its Swiss and German subsidiaries, which later collapsed.

Its Dutch operation is currently up for sale.