High Court approves Eircom survival plan

A FIVE-YEAR survival scheme for Eircom approved by the High Court will see it and related companies exit the State’s biggest examinership on June 11th next.

Mr Justice Peter Kelly said yesterday he was satisfied to confirm the scheme advocated by Michael McAteer, the examiner to Eircom Ltd, Meteor Mobile Communications and Irish Telecommunications Investments Ltd,  “and endorsed by most of its creditors”.

The scheme would safeguard most of the jobs of the workforce of almost 6,000 people and he was told there would be no job losses above some 1,000 to be achieved via a programme of voluntary redundancies to be implemented over the coming years.

He was satisfied to approve a business plan and restructuring proposals aimed at reducing the companies’ crippling indebtedness to €2.35 billion from €4 billion and with the added advantage of securing their future over five years.

A line of credit was also to be made available by the companies’ secured lenders and the companies had some €22 million cash ahead of projected figures at this stage, he noted.

Based on the evidence, he was satisfied the scheme was of benefit to the companies, their employees and the State arising from the strategic importance of Eircom.

He was also satisfied the scheme did not unfairly prejudice any class of creditors as those unsecured creditors who would get nothing under the scheme would also have got nothing in a liquidation scenario.

The scheme will involve first lien creditors, owed €2.7 billion, and swop creditors taking a cut of 15 per cent on their debt and second lien creditors taking a cut of 90 per cent.

The restructuring proposals will involve the secured creditors taking over the equity of the companies via a structure of companies. The €350 million debts of FRN (floating rate noteholders) will be wiped out.

The judge noted there was no opposition to the scheme voiced at the hearing and recalled his rejection last week of an application by Hutchison Whampoa, parent company of mobile phone operator 3 Ireland, arising from the examiner’s refusal to permit it move to the next stage of the bidding process.

The judge said the examiner had a reasonable basis for refusal on grounds including the Hutchison proposal being conditional on regulatory approval and the time limits involved in it. The beauty of the scheme now before the court was there was no conditionality and it could be given effect to in very short order, he said.

Mr Justice Kelly also commended Mr McAteer for his conduct of “a model examinership” and said he had no hesitation in awarding him his costs. Mr McAteer, appointed on March 30th last, had put a scheme before the court for approval well within the time limits for examinership and this was to be commended in circumstances where many other examiners sought the maximum 100 days available to complete much smaller examinerships, he said.

The fact the secured creditors had come together before the examiner was appointed and agreed proposals had assisted Mr McAteer in his task, the judge noted.

He directed the companies should exit examinership at noon on June 11th and said court protection would continue in the interim.

Earlier, Paul Sreenan SC, for the examiner, outlining the features of the proposed scheme, said it would involve a significant reduction in the net liabilities of the companies over the next five years. A €150 million line of credit was also to be made available and there would be some €5 billion on capital expenditure necessary to securing the companies viability.