Valentia to give bond holders more time

Valentia Telecommunications - the owner of Eircom - is expected to give its bond holders another week in which to decide whether to support the company's planned flotation.

The deadline for the holders of more than €1 billion in bonds to give their consent is tomorrow evening, but an extension is expected following discussions between Valentia's advisers and the investors.

A number of bond holders, including Standard Life, have said that they will not give their consent.

Valentia needs the consent of its bond holders, by simple majority, to restart paying dividends, which are currently suspended under the terms of the bonds.

The company, which is chaired by Sir Anthony O'Reilly, wants to pay dividends to make itself attractive to prospective investors when it floats, possibly as early as next month.

Valentia is offering bond holders incentive payments of between €2.50 and €3.75 for every €1,000 of debt held, depending on the class of bond. The company may be forced to offer larger incentive payments to win their support.

Last week, rating agency Standard & Poor's warned that paying dividends would put pressure on Valentia's highly leveraged finances. The agency said it was reviewing the company's credit rating, which is just one point above non-investment or "junk" grade. Any cut in the company's credit rating would push down the value of the bonds and is unwelcome from the perspective of bond holders.

Rival rating agency Moody's said yesterday that it did not plan to review Valentia's rating. It takes a more cautious view on Valentia, currently rating it two notches below investment grade.

Valentia is confident that its credit rating will improve after its flotation, as some of the money raised will be used to repay its borrowing, which includes another €1.4 billion in bank debt.