Eircom made pretax loss of €1.49bn last year

EIRCOM MADE a pretax loss of €1.49 billion in the year to the end of June 2011, while its revenue declined by 8 per cent to €1.68 billion.

The figures were revealed in a report to the High Court by interim examiner Michael McAteer of Grant Thornton, who yesterday had his appointment confirmed by Mr Justice Peter Kelly.

The company has yet to produce its statutory accounts for the year to the end of June 2011 and this is the first time these figures, which are unaudited, have been aired in public.

The sizeable fluctuation in profitability is attributed to non-cash charges arising from goodwill impairments relating to the previous acquisitions of the fixed and mobile business.

The examiner’s report shows that Eircom’s revenue declined from €1.82 billion in 2010. Its earnings before interest, tax, depreciation and amortisation were unchanged last year at €649 million.

However, it moved from an operating profit in fiscal 2010 of €292 million to a loss of €1.2 billion last year.

An after-tax profit of €47 million in 2010 became a loss of €1.49 billion last year.

The report states Eircom’s total borrowings were €4.116 billion.

The group breached its covenants with senior lenders on June 30th last year and its loans were called in on March 28th, 2012, with the company seeking the protection of the court via examinership.

Mr McAteer’s report states that he has engaged with Morgan Stanley, which ran a sales process for Eircom before the examinership process, to respond to parties that might express an interest in acquiring the group.

Egypt-based Accelero Capital is believed to have been the only party to put a meaningful offer on the table during the pre-examinership sales process.

Any parties interested in investing in the company this time around have until April 23rd to submit indicative offers. A second phase would allow for due diligence to take place with a deadline of May 7th for final offers. The examiner said no expressions of interest had been received to date.

Mr McAteer has also engaged Jefferies International Ltd to provide an independent assessment of the enterprise value of the group to assist him in preparing a scheme of arrangement.

A final report from Jefferies is expected by May 2nd.

The matter returned before the High Court yesterday when Mr Justice Kelly heard there was no opposition to the application to confirm examinership, although some concerns were expressed concerning aspects of the proposed five-year business plan.

Paul Gallagher SC for Eircom said there were no relevant changes in the companies’ position since the interim examiner was appointed and the companies met the criteria for appointment of an examiner.

The judge was told DW Investment Management Ltd was making no formal objection to examinership but was reserving its position amid concerns about reports that unsecured floating rate note holders – who are owed €350 million – would receive nothing.

Vodafone Ireland, Eircom’s largest wholesale customer and a supplier of services to it, indicated it had some concerns about aspects of the proposals in the independent accountants’ report and would be seeking to raise its concerns with the examiner.

The court heard that first- and second-lien lenders supported the examinership process.

The Revenue Commissioners, which is owed €60 million, adopted a neutral position, while ComReg supported the petition.

The judge said Eircom and its related companies met the criteria for examinership, including insolvency, as they were insolvent “in spades”, he said.

The report of the interim examiner fortified him in his view that Eircom had a reasonable prospect of survival as a going concern.

He noted that trade creditors would continue to be paid in the interim and set May 18th as the date for the matter to return to court.