U.S. suit could cut Germany's Orion Cable

Investment funds EOS and Viathon in $780 mil action

Update: Orion Cable might get a reprieve

COLOGNE, Germany -- Potential buyers are circling Germany's No. 3 cable operator Orion Cable in the wake of a €550 million ($780 million) suit by two U.S. investment funds that could force the company into bankruptcy.

Investment funds EOS and Viathon launched the action last week against Orion's Luxembourg-based parent Escaline.

If the suit is successful, it will mean the end for Escaline and will lead to the sell-off of Orion's German cable operations Primacom and Tele Columbus. According to its own figures, Orion serves 3.2 million cable customers in Germany.

Germany's No. 1 and No. 2 cablers -- Kabel Deutschland and Unitymedia -- are already eyeing Orion's choicest networks. Mobile giant Vodafone is also believed to be interested in acquiring parts of the Orion network should it be put on the block.

KDG acquired 1.1 million customers from Orion in a deal last year. A German court, however, ruled that Orion had overcharged and in May ordered the company to pay €67.5 million ($96 million) back to KDG. That left Orion out of pocket and forced the company to return to its creditors to restructure its €945 million ($1.3 billion) debt load.

The restructure triggered the suit by EOS and Viathon. The two U.S. hedge funds bought up some of Escaline's debt in 2007 with the caveat that they could demand payout in the case of a debt restructuring.