Banks seeking to recover money lent to MobilCom, the German subsidiary of France Télécom, have negotiated an innovative structured convertible bond with the French telecoms firm that can be treated as equity.

France Télécom said it has signed a "memorandum of understanding" with a banking syndicate led by Deutsche Bank, Merrill Lynch, ABN Amro and Société Générale, in which it will buy €4.7bn ($4.6bn) of the MobilCom loans in return for a subordinated undated convertible security.