Examiner appointed to Eircom

The High Court has confirmed the appointment of an examiner to troubled telecommunications giant Eircom.

The company had sought court protection last month to facilitate a restructuring of it and related companies employing some 5,800 people.

On March 30th, Mr Justice Peter Kelly appointed an interim examiner to the company after expressing the view the company, while insolvent, has a reasonable prospect of survival under a new five year business plan.

The matter returned before the judge today when he was told there was no opposition to the application to confirm examinership. Some parties, including Vodafone Ireland and DW Investment Management Ltd, expressed concerns about aspects of the proposed restructuring and said they proposed to raise those with the examiner.

The Revenue Commissioners, which the court heard is owed some €60 million mainly from Eircom Ltd in corporation tax, PRSI, PAYE and Vat, said they were adopting a neutral position.

Bill Shipsey SC, for communications regulator Comreg, said it supported the petition and would actively assist the examinership process.

The judge said he was satisfied to confirm Michael McAteer of Grant Thornton as examiner. He was sastified the companies met the criteria for examinership, including insolvency, as they were insolvent "in spades". The report of the interim examiner also fortified him in his view the companies had a reasonable prospect of survival as a going concern.

In all the circumstances, this was an appropriate case to appoint an examiner, he said. He returned the matter to May 18th and noted trade creditors would continue to be paid in the interim.

Examinership can run for a maximum of 100 days during which time a business plan is implemented to ensure a company can continue as a going concern. The plan must be approved by a majority of creditors and the High Court.

The application for examinership was brought by Eircom and two related companies - Meteor and ITI - to ensure protection from creditors while implementing the plan allowing them to trade out of their difficulties.

The court previously heard, although trading profitably, Eircom's debt to various classes of creditors now stood at €3.4 billion. Profits had declined due to a difficult operational climate and it needed significant capital investment in relation to the roll out of the fibre-optic infrastructure which was key to its competitiveness.

Demands by its main creditors that the debt be serviced last month had resulted in insolvency.

A €1.37bn surplus of assets of liabilities was overtaken by its contingent liabilities and therefore its cash flow was not sufficient to meet its debt repayments.

An independent accountant's report by PriceWaterhouseCooper was of the opinion Eircom had a reasonable prospect of survival subject to conditions including the reduction of staff by 1,000 over the next five years through incentivised redundancy and the acceptance by creditors of significant reduction in what they are owed.