Eircom share trust members to get €125m tax-free windfall
MORE THAN 14,000 current and former staff of Eircom are set to share a tax-free windfall of about €125 million following a decision by the board of the employee share ownership trust (Esot) to wind it up after the company recently emerged from examinership with new owners.
This would amount to an average tax-free payout to Esot scheme members of €8,928.
Since the establishment of the Esot in late 1998, members have received, on average, about €62,500 each, depending on when they joined the trust.
The Irish Times has learned that the Esot will distribute €85 million in Eircom preference shares to members within a month or so.
The preference shares were segregated from the general assets of Eircom, which gave them protection from creditors and meant they did not form part of the examinership process.
The Esot, which is chaired by Jerome Barrett, also holds about €40 million of Vodafone shares, which will be distributed to members at some point over the next 12 months. The Vodafone shares held by the trust date back to the sale of Eircom’s former mobile phone arm, Eircell, to the British telecoms operator more than a decade ago.
The Esot board is expected to inform members of its decision today. Many members will earn more than this average figure of €8,928 as payouts are determined according to when individuals joined the scheme and how many shares they held in the trust.
The last payout by the Esot was in November 2011, when about €15 million worth of Vodafone shares were appropriated.
To date, Esot members have received about €750 million in tax-free cash.
Under an agreement with the Revenue Commissioners, the Esot was due to be wound down in 2014 but these plans have been accelerated following Eircom’s examinership process. The examinership resulted in the company’s gross debts being reduced to €2.35 billion, from €4 billion previously, and senior lenders taking 100 per cent ownership of the company.
Prior to the examinership, the Esot owned about one-third of Eircom, with Singapore-based STT holding the balance of the shares.
The trust was established in advance of Telecom Éireann’s privatisation in 1999.
Eircom has changed hands five times since then. The Esot participated in each of these transactions as a significant equity holder until the examinership process.
STT’s decision in December to walk away from its investment in Eircom effectively ended the Esot’s involvement as a shareholder.