Eircom board meets ahead of update to its €3.16bn lenders
THE board of Eircom met yesterday for the last monthly board meeting before it is due to update lenders -- who are owed €3.16bn -- on its finances.
Representatives of majority shareholder STT, from Singapore, and the employee ESOP were due to attend the meeting.
A lender to Eircom said bonds owed by the company had been stable recently after weak trading over the summer.
Yesterday, senior bonds were trading at 55c in the euro and more junior bonds were changing hands in the low teens.
Eircom owes €2.85bn to banks. Ranked below that is €350m of senior bonds, which are owed mainly to hedge funds and mutual funds. Then there is €600m of very junior bonds held by similar investors.
The bonds are seen as vulnerable to suffering writedowns if the company opts to restructure its debt. Eircom is being advised by debt-restructuring specialists from investment bank Gleacher Shacklock and by JPMorgan, which is also one of its most senior creditors.
Market sources believe that Eircom could try to slash debt by offering to buy back bonds at a discount or by offering to swap some bonds for a stake in the company.
That is similar to the process under way at Anglo Irish Bank.
If Eircom and its shareholders are confident that they can avoid breaching the terms of their debt, there is no need for them to do anything. The company could simply continue to pay interest on the debt.
Meanwhile, the Anglo Irish bond buy-back was still the big news in the bond market.
One investor said the structure of the Anglo Irish Bank deal could lead to stalemate because a majority of bondholders have to back the deal.
If a majority backs the offer, dissenters risk being left with almost nothing. But the investor said that if bondholders sensed the deal could fail, then they could abstain in big numbers, bringing the process to a halt.