Out of step

Hailed as an innovative solution to the problems faced by beleaguered telecomsstruggling to issue debt, step-up coupons have since become something of a poisoned chalice. Joanne Hart evaluates the troublesome legacy of a product of its time

In 2001, Europe’s state-owned or formerly state-owned telephone companies were in trouble. Having overspent in the late 1990s on projects such as third-generation mobile phone technology – condemned as a white elephant – and buying or building internet service providers – most no longer operational – the incumbents were encumbered with debt as the new millennium was dawning.

Despite, or indeed because of its parlous condition, the industry desperately needed capital. But at the same time bond