Eircom survival plan to be approved

 

A survival plan for Eircom is expected to be approved tomorrow after the High Court rejected what was described by the companies and their examiner as a groundless attempt to "derail" the process.

Michael McAteer, examiner to Eircom Ltd, Meteor Mobile Communications Ltd and Irish Telecommunications Investments Ltd, is recommending approval of the survival plan so the companies can exit examinership as soon as possible. if, as expected, creditors approve the plan, it will then have to secure High Court approval.

Mr Justice Peter Kelly this afternoon refused an application for orders deferring the creditors' meetings and requiring the examiner withdraw his refusal to admit Hutchison Whampoa Ltd to phase two of the process providing for due diligence.

The judge said the orders sought would effectively involve the court in exercising a commercial judgment and micro-managing the examinership, the largest in the history of the State, which the court was not permitted to do.

He also said there was a reasonable basis for the examiner's decision refusing to allow Hutchison Whampoa move to phase two. The examiner should not be criticised for moving as fast as possible in the examinership, he added.

Hutchison, parent company of mobile phone operator 3 Ireland, had claimed an offer from it was not properly considered by the examiner and it should be permitted due diligence and "a proper appraisal" of its offer.

The application came after the examiner last week rejected the revised €2 billion cash offer for Eircom from 3 Ireland and Hutchison Whampoa and said no further offers would be considered.

Hutchison Whampoa claimed "lock-up" restructuring proposals agreed between the companies and senior creditors prior to the examinership prevented exploration of potential investment opportunities with others.

Mr McAteer denied that claim and said he was not a party to or bound by the senior offer but, having considered it and the Hutchison Whampoa indicative offer, he believed the senior offer was the best option for the companies and was recommending it for approval.

Mr McAteer's counsel Paul Sreenan SC argued today the Hutchison offer was made late in the examinership, was inferior to the senior offer and was conditional on regulatory approval which could not be achieved within the examinership timeframe. Granting the Hutchison Whampoa application could derail the entire examinership, he argued.

Paul Gallagher SC, for Eircom, said the Hutchison Whampoa application was "audacious" and "extraordinary", there was no legal authority for it and it was brought by a competitor who was seeking orders including one requiring Eircom to disclose confidential company information to it.

Hutchison Whampoa was effectively seeking to have the examiner play some form of "corporate Riussian roulette", counsel argued.

Michael Collins SC, for the first lien creditors, said the reality is the secured creditors, owed €3 billion, are the only creditors who will get anything irrespective of what offer is accepted. The claim that FRN noteholders would do better under the Hutchison Whampoa "shadow offer" had no basis.

Counsel said he had to ask had the bringing of the application anything to do with the fact 3 Mobile is a competitor of Eircom and would get access to highly confidential information if Hutchison Whampoa secured the orders sought was successful, he asked.

A solicitor for a committee representing second lien creditors, who will lose 90 per cent under the examiner's proposals and get nothing under the Hutchison Whampoa offer, said they regarded the Hutchison proposals as unfair and prejudicial.

The application for deferral of the creditors' meetings and requiring the Hutchison Whampoa offer be admitted to phase two was also brought by New York-based DW Investment Management LP, which claimed to represent more than 50 per cent of creditors of Eircom holding €350 million in Floating Rate Notes.

Its legal standing was disputed by the companies, examiner and senior creditors. Mr Sreenan argued DW Investment had been attached to the Hutchison Whampoa application in an effort to secure the necessary legal standing to bring it.

The trustee of the FRN notes at issue was Bank of New York Mellon Nominees Ltd and DW Investment was precluded from asserting that party's rights, counsel argued.

He also rejected arguments FRN holders would get some €50 million under the Hutchison Whampoa bid, as opposed to nothing under the bid recomended by the examiner. Any monies received by FRN holders will automatically be held by the trustee for the benefit of the secured creditors, he said.

Replying, Grainne Clohessy SC, for the applicants, said Hutchison Whampoa had made only an indicative offer and could make a final offer within10 days and the Eircom companies would therefore not be prejudiced. There was also no suggestion the senior offer would be taken away if the 10 days were granted.

Any entity considering a bid for companies would be expected to do due diligence, she also argued. It could not be the case that a competitor could not be a bidder in a restructuring process and it could not be a suprise such a bid might involve regulatory issues.

All Hutchison Whampoa wanted was to be let in and given a chance to make a final bid, she said.