Sunday 23 July 2017

Eircom bosses may bag €60m bonus if IPO gets go-ahead

Eircom chief executive Herb Hribar
Eircom chief executive Herb Hribar
Nick Webb

Nick Webb

Eircom boss Herb Hribar and his executive team could be in line for a massive €60m bonus if they float the €2bn-plus telecoms company. It will be the seventh change of ownership in 15 years.

Last Friday, Eircom revealed that it was "now exploring a number of options with a view to further strengthening the financial position of the group. These options include a possible listing on a public market." Eircom has appointed investment bank Rothschild to advise on strategic options.

More than 200 banks and investment funds hold Eircom debt. US investor Blackstone holds the largest single stake, with a shareholding of almost 25 per cent. Eircom could clear its €2.35bn debt mountain if it can raise enough money on public markets, which would generate a huge profit for its initial backers. Since taking control at Eircom, Hribar and his team have stabilised the company's finances and launched a number of new initiatives.

Details of the highly lucrative bonus scheme were contained in bond documents filed by Eircom last year. These showed that the telecoms company had introduced a new bonus scheme designed to "incentivise management to deliver maximum returns to shareholders on a sale or other form of exit".

Under the terms of the "management incentive scheme", the top brass, including chief executive Mr Hribar and finance chief Richard Moat, may be entitled to up to €60m if they can transform the company. The bonus kicks in if they can essentially raise the value of Eircom above €1.8bn. The executives are in line for 10 per cent of any increase in value above that level. This is capped at €2.4bn. They are also entitled to bonuses on the paydown of senior debt.

In 2012, the company's lenders backed a scheme that wiped out 40 per cent of Eircom's then €1.8bn debts and saw the shareholdings of former owners STT of Singapore vapourised.

Two years ago, Chinese conglomerate Hutchison Whampoa – which owns Three Ireland – tried to buy Eircom out of examinership. However, the approach was unsuccessful, with Hutchison subsequently spending €850m to buy Telefonica's O2 Ireland business instead.

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