Digicel bid for control of Eircom 'just days away'
Published 02/11/2011 | 05:00
DENIS O'Brien's Digicel Group will seek an alliance with Eircom's top lenders before launching a bid for control of Ireland's most important telecoms company, the Irish Independent has learned.
A formal proposal from Digicel could be ready within days, according to people involved in the debt talks.
It is understood that Digicel does not plan to break-up Eircom if the takeover succeeds.
An offer for Eircom would be conditional on the company being able to write off more than €1bn of its current €3.7bn of debt, to return it to a sound footing.
But current shareholders, including an employee share trust, face being wiped out if the bid succeeds.
A Digicel spokeswoman refused to comment on the latest speculation, but sources close to the company last night confirmed that the deal was being prepared.
In 2001, Mr O'Brien was behind the e-Island consortium that lost out in the bidding for Eircom's fixed-line business, when Eircom's then fixed and mobile units were split up. At that time, Eircom was sold to the Valentia consortium, led by Sir Anthony O'Reilly.
This time around the interest in Eircom is from Digicel, and there is no plan to break it up.
Mr O'Brien founded Jamaica-based mobile phone operator Digicel in 2000. It has more than 11 million customers and a turnover last year of US$2.23bn (€2.6bn).
But according to ratings agency Fitch, Digicel has debts of $4.6bn. Market sources yesterday said this level of debt would make it difficult for Digicel to raise new debt to fund its bid for Eircom, limiting the size of any offer made to lenders.
Eircom is already locked in negotiations with lenders to slash around €1bn of its €3.7bn debt pile. This high level of debt has resulted in the ownership of the company being up for grabs.
Shareholders and lenders are locked in a desperate tussle to be among those still standing when the debt restructuring is complete. Current shareholders, including an employee share trust, would be wiped out if an outsider such as Digicel got its hands on the company.
The investors best placed to emerge intact from the Eircom situation are top-ranked "first lien" lenders.
They are owed €2.4bn and their position as well secured, senior creditors gives them a veto over any proposal for control of the company.
Digicel is looking to team up with these money managers and banks before launching its bid to take control of Eircom. Informal talks are understood to be under way already, but no detailed proposal has been made. It is not yet clear whether more junior ranked lenders would be invited to join the bid.
The top lender group is already considering two other proposals. The first would see current owner Singapore Technologies Telemedia (STT) buy its way back into Eircom with a €300m cheque, the other is from lenders offering to swap the loans they are owed for ownership of Eircom.