EIRCOM’S SENIOR lenders have rejected a debt restructuring proposal put forward earlier this week by majority shareholder Singapore-based STT.
A committee representing first-lien lenders, who are owed about €2.6 billion, informed STT and Eircom’s independent directors yesterday that they were terminating discussions on the proposal, which was tabled on Monday.
Informed sources said the lenders now plan to press ahead with their own proposal, which would involve them taking full ownership of Eircom.
It is believed the main sticking point for the lenders was the material adverse clause inserted in STT’s proposal.
STT, which currently owns 65 per cent of Eircom, had offered to invest €100 million in equity upfront and the same after 12 months. However, it wanted the initial €100 million to be repaid in the event of Ireland leaving the euro within 12 months of the funds being handed over.
In effect, this investment would have enjoyed a “super senior” creditor status. This clause was not acceptable to the senior lenders.
Eircom declined to comment yesterday on the latest twist in this long-running restructuring saga.
STT and the first-lien lenders also declined to comment.
It is understood Eircom’s independent directors – chairman Ned Sullivan, chief executive Paul Donovan, Bernard Somers and Nick Hartery – will meet next week to discuss the proposals they have received.
They could bring a recommendation to the full board of the company before the end of the week.
Eircom’s second-lien lenders have also tabled an offer, although this appears to have little chance of being accepted.
The proposal from the first-lien lenders involves them taking a haircut of 7.5 per cent on their debt. This equates to about €195 million.
They would also extend the maturity of the debt by three years out to 2017.
The lenders would offer equity participation to senior executives of up to 10 per cent.
Significantly, they support management’s business plan for Eircom, which involves an investment of €300-€400 million in a fibre network rollout to a million homes across the country, beginning in January.
The lenders do not propose to inject new equity into Eircom, which had €392 million in cash at the end of October.
In total, Eircom has net debts of €3.7 billion. Only the first-lien lenders are expected to be repaid.
The employee Esot, which owns 35 per cent of Eircom, also currently faces being excluded from the restructuring process.
In a statement yesterday, Steve Fitzpatrick, general secretary of the Communications Workers Union, said: “It is now time for the continuous distraction of these long-running financial structural discussions to be brought to a conclusion and allow the company to be run in an straightforward commercial manner.”
