Eircom withholds coupon payment

Eircom has withheld a €5.77 million coupon payment to its junior lenders, following a request from its senior bondholders.

The company had warned last week that it planned to withhold the payment, which was due yesterday.

Heavily indebted Eircom struggled to restructure its massive debts since the middle of last year. It has four tiers of lenders, to which it owes a total of about €3.6 billion. The first lien senior lenders and second lien senior bondholders are owed about €3 billion.

The company has avoided defaulting on its loan covenants thanks to a series of waivers granted to it by its senior lenders. One of the conditions of those waivers has been that the senior lenders were granted rights to suspend coupon payments on the company’s floating rate notes.

The company said this week's payment suspension does not affect the continued operation of the group’s business.

Days before Christmas its Singapore majority shareholder ST Telemedia withdrew a proposal to inject a further €200 million into the company. Its directors subsequently resigned from the Eircom board. ST Telemedia holds a 65 per cent stake in Eircom, with the employee Esot holding 35 per cent.

Eircom's board has two investment proposals from its lenders. The proposal from senior lenders would see them take full control, reduce their debt and extend the maturity of their loans to 2017.