Esat Telecom is to raise $160 million (£108 million) in a new issue of high-yield notes. Esat has said that the notes will be offered and sold only to institutional buyers.

The note issue was immediately given a B+ rating by Standard & Poors's and S&P said that the fund-raising should pre-fund the bulk of Esat's medium term investment needs. S&P said that the rating "reflects the significant business risks faced by Esat" and also "reflects the group's highly leveraged capital structure".

But the S&P report seems to have been written ahead of the announcement by Telecom Eireann of a 40 per cent cut in interconnect rates. S&P said: "The failure to negotiate lower interconnection rates has resulted in Esat Tel's gross margins and net income substantially lagging the original business plan."