Eir seeks to impose lower rate on €1.6bn of senior loans

Eir has warned senior lenders who refuse to accept its offer of a lower rate on €1.6 billion of loans that they face the prospect of being bought out.

The telecoms group, formerly known as Eircom, has hired Goldman Sachs to seek out fresh money from existing senior lenders and new debt investors, should creditors currently enjoying a 4.5 per cent rate not accept a lower rate of 4 per cent, based on current market pricing, ahead of a deadline of October 7th.

In a presentation to lenders, Eir also said it would consider using liquidity resources, including cash on its balance sheet, “to repay non-consenting lenders.”

Eir had €156 million cash at the end of June and access to a €150 million revolving credit facility.

A 4 per cent return may still be seen as very attractive to investors at a time when bonds globally are yielding very little due to central bank actions. Even though Eir’s bonds are not eligible for the European Central Bank’s bond-buying programme, as the notes are below “investment grade”, investors have been snapping up such debt in recent times in a hunt for income.

Debt profile

Eir, which posted annual revenue growth in the 12 months to June for the first time in eight years, has spent much of 2016 improving the profile of its debt mountain.

In early June, it sold €500 million of bonds at a market interest rate, or yield of 4.5 per cent, using most of the proceeds to refinance €350 million of notes it had sold in 2013, which were carrying an annual interest rate of 9.25 per cent. The 2013 deal took place a year after the group emerged from examinership, where its debt, following a series of ownership changes, was cut by 40 per cent to €2.3 billion.

The company moved in August to sell a further €200 million of bonds to pay off senior creditors that took part in the massive refinancing of its debt four years ago. The group has about €2.36 billion of debt, the level of which will be unchanged after the current transaction, which should shave about €10 million off its annual interest bill in the coming years.