Court ruling due on plan for survival of Eircom

A HIGH Court ruling is expected today on whether a proposed survival scheme for Eircom can be put before its creditors tomorrow as planned, amid claims it will lead to Eircom being owned by “a collection of banks” and will involve an unsustainable level of debt.

Both Eircom and examiner Michael McAteer have rejected such claims and are anxious for the meetings to proceed as scheduled so the companies involved – Eircom, Meteor Mobile Communications and Irish Telecommunications Investments – can exit examinership as soon as possible, the court was told yesterday.

Mr Justice Peter Kelly will today continue hearing an application on behalf of a disappointed bidder for Eircom aimed at requiring the examiner to withdraw his refusal to admit it to phase two of the process providing for due diligence.

Hutchison Whampoa, the parent company of mobile phone operator 3 Ireland, claims its offer was not properly considered by the examiner and that it should be permitted due diligence and “a proper appraisal” of its offer. It is seeking directions including one deferring the creditors’ meetings to allow due diligence.

It is claimed the examiner is sticking “rigidly” to a compressed timeframe, which could see the companies exit examinership within 60 days, when the potential time for finalisation of a scheme can extend to 100 days.

Yesterday was day 50 of the examinership. Mr McAteer said last week the revised €2 billion cash offer for Eircom from 3 Ireland and Hutchison Whampoa was rejected and no further offers would be considered.

Mr McAteer has denied claims he was unwilling to consider alternatives to an offer made by the companies first and second lien creditors which had been agreed in advance of his appointment.

Hutchison Whampoa alleges “lock-up” restructuring proposals agreed between the companies and senior creditors prevented exploration of potential investment opportunities with third parties and effectively pre-determined the success of the proposed scheme of arrangement.

Hutchison Whampoa’s application is also brought by New York-based DW Investment Management LP (which claims to represent some creditors of Eircom holding €350 million floating rate notes but its legal standing has been disputed by the examiner).

Under the proposed scheme of arrangement, first lien, second lien and swap creditors will do better than the floating rate noteholders who will not receive a dividend and will have their debt “extinguished”.

DW Investment Managers claims its clients are unfairly prejudiced by that scheme and that the Hutchison Whampoa proposals would involve a €50 million payment for floating rate noteholders.

Moving the application, Michael Cush SC said his side had been asking the examiner to allow it due diligence from late April and, had it been granted then, it could have adhered to the examinership timeframes.

In an affidavit, Mr McAteer said he was at all times willing to consider alternative investment proposals but there were a number of fundamental difficulties with the offer from Hutchison Whampoa.