AN UNPRECEDENTED application that will come before the Commercial Court today has cast doubt on plans by Eircom’s examiner to finalise a survival scheme with creditors on Friday for companies employing 5,800 people.
New York-based DW Investment Management LP, which is representing 52.4 per cent of creditors holding €350 million in floating rate loan notes (FRNs) in Eircom and Hutchison Whampoa Ltd (HWL), parent company of mobile phone operator 3 Ireland, have taken proceedings following a decision last week by Eircom examiner Michael McAteer of Grant Thornton to reject a revised €2 billion cash offer from 3 Ireland and HWL.
Under the proposed scheme of arrangement for Eircom Ltd, Meteor Mobile Communications Ltd and Irish Telecommunications Investments Ltd, the FRNs will not receive a dividend and will have their debt “extinguished”.
DW Investment Managers claims its clients are being unfairly prejudiced by the scheme as the HWL proposals would involve a €50 million payment for FRNs.
HWL has alleged that “lock-in” restructuring proposals for the Eircom companies, agreed between the companies and senior creditors around the time of the examiner’s appointment at the end of March, have prevented exploration of potential investment opportunities with third parties and effectively pre-determined the success of the proposed scheme of arrangement.
Among various directions being sought from the court by the two applicants is one retracting a letter sent from Morgan Stanley, on behalf of Mr McAteer, advising HWL that the examiner had decided not to proceed with its bid, with the effect that HWL would not be allowed into phase two of the bidding process.
The applicants are also seeking a direction requiring the examiner to postpone meetings of the Eircom companies’ creditors convened for this Friday in Dublin.
When the matter was mentioned to Mr Justice Peter Kelly at the Commercial Court yesterday, he told Michael Cush SC, for the applicants, that he had never heard of an application like it. Mr Cush agreed it was unprecedented.
The judge agreed to allow the application to be served at short notice on the examiner and other affected parties.
The applicants are seeking directions requiring the examiner to engage with them and allow them access to Eircom’s management team, to the electronic data room containing information relating to the companies and to a business report prepared by Ernst Young.
They also want access to a valuation report prepared for the examiner by Jefferies International.
Other directions sought would require the examiner to give the applicants a copy of the agreement entered into between the Eircom companies and their senior creditors. The scheme was expected to receive the necessary support from creditors. The entire issued share capital of Eircom Ltd is to be transferred to an entity established on behalf of the secured senior lenders.
The first lien senior lenders are to have their €2.7 billion debts reduced by 15 per cent while second lien creditors will have their €350 million borrowings cut by 90 per cent.
