Eir says sales recovery continues as it sells €200m of bonds

Telecoms group Eir said its sales have continued to recover as it took to the market to sell €200 million of bonds, as it continues to pay off senior creditors that took part in a massive refinancing of its debt four years ago.

The company, formerly known as Eircom, sold the six-year bonds less than seven weeks after it issued €500 million of similar notes at a market interest rate, or yield, of 4.5 per cent. It used most of the proceeds of that sale to refinance €350 million of bonds it had sold in 2013 and were carrying an annual interest rate of 9.25 per cent.

The new bonds were priced to yield 4.07 per cent, the company .

In a brief trading update issued on Monday, the company said its sales grew by an estimated “low single digit” per cent in the three months to the end of June, compared to the same period last year. This would mark the fifth consecutive quarter of growth following years of decline.

“This increase was primariliy due to growth in broadband customers, an increase in [bundling of services], price increases implemented in the current year and the acquisition of Setanta Sports (now Eir Sport),” the company said.

It estimates its earnings before interest, tax, depreciation and amortisation rose by a “single digit” per cent in the last quarter.

Ultra-low yields

Eir's re-engagement with the bond markets comes as euro zone corporate bond yields have been pulled down to ultra-low levels as the European Central Bank has begun to buy such debt as part of its €1.7 trillion quantitative easing programme to revive the region's economy and inflation.

While Eir’s bonds are not eligible to be bought by the ECB, as ratings agencies deem them to be below “investment grade”, investors have been snapping up so-called junk bonds in recent times in a hunt for income. This has served to push down the yield of such bonds.

Eir had racked up €4.1 billion of gross debt through five ownership changes in 13 years before it filed the country’s biggest creditor examinership in March 2012. Its most senior, or first-lien, lenders wrote off 15 per cent of their €2.4 billion net loans and took control of the company as more junior creditors were virtually wiped out.

Legacy lenders

After the 2012 restructuring, Eir still owed its senior lenders about €2.36 billion. Following today’s bond sale, the group would still have the same amount of overall debt, but the amount owed to the legacy lenders is expected to fall below €1.7 billion.

Meanwhile, Eir said it is exploring amending its senior credit facilities agreement to be more in line with terms and covenants on its bon documents. This would give the group “additional operational flexibility”, it said.

Deutsche Bank, Credit Suisse and Goldman Sachs are leading the deal, with Barclays, BNP Paribas, Norwegian lender DNB, JP Morgan and Morgan Stanley also involved.

GIC, Singapore's sovereign wealth fund, completed the purchase of a 16.3 per cent stake in Eir from a group of investors, largely hedge funds that converted debt into equity in 2012 at the time of the restructuring. Anchorage Capital Group remains the largest shareholder, though its stake has fallen marginally to 36.4 per cent from almost 38 per cent.