Eircom lenders table debt proposal

EIRCOM’S SENIOR lenders are believed to have formulated a proposal to deal with the company’s debt restructuring programme, and they will submit this to the company’s independent directors by tomorrow’s deadline.

However, it was not clear last night if Eircom’s shareholders – Singapore-based STT and the employee Esot – would table a plan to deal with the company’s debt restructuring.

The first lien lenders, who are owed about €2.4 billion, are believed to have formulated a proposal that would involve them taking 100 per cent of the equity in Eircom in return for writing down their debt by 7 to 9 per cent.

They would also agree to extend the maturity of the debt to September 2017, but there would be no cash payment to the lenders.

This would allow Eircom, which is led by chief executive Paul Donovan, to access the near €400 million in capital on its balance sheet for investment purposes.

Other lenders, who are owed about €1.3 billion, would be wiped out.

This is effectively a back-up plan for the first lien lenders in the event that Eircom’s shareholders do not put forward their own plan.

STT and Esot had been expected to submit a proposal two weeks ago, but they failed to meet the first deadline for offers set by Eircom’s independent directors. As a result, the directors extended the deadline until today.

STT and the Esot had been expected to submit a plan that would have involved paying €300 million to first lien lenders to write down some of their debts.

The lenders would also have taken a haircut of about 8 per cent on their loans in return for a 20 per cent stake in the business.

This proposal never materialised, and it is not clear if STT will meet today’s deadline.

Sources last night suggested that the company’s shareholders in Singapore might be increasingly concerned about the euro zone financial crisis.

This could not be confirmed but similar concerns led to the sale of State-owned Irish Life being pulled late last Friday.

Eircom’s independent directors will ultimately make a recommendation on any proposals that are received to the subcommittee representing the first lien lenders. The committee will then put it to a vote of lenders in the consortium.

Eircom breached its banking covenants in the summer. Its earnings are in decline due to recession and competitive pressures, and it is struggling to service its €3.7 billion net debts.