Business Irish

Sunday 22 October 2017

Doubt cast over Eircom's examiner plans for company after 'unprecedented' court application

Don Lavery

DOUBT has been cast over plans by Eircom's examiner to finalise a survival scheme with creditors on Friday following an application to the Commercial Court.

New York-based DW Investment Management LP (representing 52.4pc of creditors of Eircom who hold €350m of Floating Rate Notes) and Hutchison Whampoa (HWP), parent company of mobile phone operator 3 Ireland, have taken proceedings following last week's decision of Eircom examiner Michael McAteer rejecting a revised €2bn cash offer for Eircom from 3 Ireland and HWP.



Under the proposed scheme of arrangement for Eircom Ltd, Meteor Mobile Communications Ltd and Irish Telecommunications Investments Ltd, the floating rate noteholders will not receive a dividend and will have their debt “extinguished”.



DW Investment Managers claims its clients are unfairly prejudiced by the scheme as the HWP proposals would involve a €50m payment for FRNs.



HWP has alleged that "lock-in" restructuring proposals for the Eircom companies agreed between the companies and senior creditors around the time of the examiner's appointment have prevented exploration of potential investment opportunities with third parties and effectively pre-determined the success of the proposed scheme of arrangement.



The matter will come before the Commercial Court tomorrow when among the directions to be sought by the two is one retracting a letter sent from Morgan Stanley, on behalf of Mr McAteer, advising HWL the examiner had decided not to proceed with the HWL bid.



The effect would be that HWL would not be allowed into phase II of the bidding process.



The applicants are also seeking a direction requiring the examiner to postpone meetings of the Eircom companies creditors convened for this Friday.



When the matter was mentioned to Mr Justice Peter Kelly at the Commercial Court today, he told Michael Cush SC, for the applicants, he had never heard of an application like it.



Mr Cush agreed it was unprecedented.



The judge agreed to allow the application be served at short notice on the examiner and other affected parties and returned the matter to tomorrow.



The applicants are seeking directions requiring the examiner to engage with them and allow them access to Eircom's management team, to the electronic data room containing information relating to the Eircom companies and to a business report prepared by Ernst & Young.



They also want access to due dilgence material and a valuation report prepared for the examiner by Jefferies International.



Other directions sought would require the examiner to give the applicants a copy of the agreement entered into between the Eircom companies and their senior creditors.



The proceedings could defer Friday's meetings of creditors in Dublin where the examiner intended to outline scheme of arrangement proposals which would then be put before the Commerical Court for approval.



The scheme was expected to receive the necessary support from creditors as they had already agreed to its terms in principle before the examinership process commenced on March 29th.



The proposed agreement provides for debt reorganisation and changes in equity ownership to allow Eircom exit examinership.



The entire issued share capital of Eircom Ltd is to be transferred to Bidco, an entity established on behalf of the secured senior lenders.

The first lien senior lenders are to have their €2.7bn reduced by 15pc while second lien creditors will have their €350m borrowings reduced by 90pc.



Eircom’s gross debts will be reduced from about €4bn to €2.35bn.



Floating rate noteholders, owed about €350m, will not receive a dividend and will have their debt “extinguished”, according to the scheme document.



The payment-in-kind noteholders, owed about €670m, will also be wiped out.



The scheme document estimates Eircom’s assets at €2.4bn and its liabilities at €4.1bn. It estimates a deficit of €3.1bn as regards creditors in the event of a liquidation.



Last week, Mr McAteer said no other proposals would now be considered for Eircom.



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