Eircom cash pile shrinks as loan repayments take toll
Published 21/02/2012 | 05:00
EIRCOM'S cash pile shrank from almost €400m to just €326m over the last six months of 2011, the company said last night.
The cash was gobbled up by interest and loan payments on the company's €3.7bn of debts, not capital expenditure or redundancy costs, a spokesman said.
Interest payments will slow down over the next year, after the firm stopped paying interest on some loans and bonds.
However, a €30m loan repayment to top lenders still falls due in March.
News that the cash pile is running down came after Eircom managers yesterday gave a confidential update to the company's best secured lenders on trading at the debt-stricken business.
The news is understood to have been grim, with revenue falling below even last year's sharply revised down estimates.
There is no let-up in sight either, with managers warning of "significantly" lower earnings in the years ahead, out to 2017.
Yesterday's financial update is likely to be the last before Eircom files for insolvency protection in the coming months.
Lender sources said they expected a final debt restructuring agreement to be struck by the end of March, followed by an application to the courts to appointment an examiner.
Eircom boss Paul Donovan and senior executives met lenders in London.
The meeting was organised by lenders themselves with both "first lien" lenders -- a 200-strong group owed €2.4bn -- and slightly lower ranked "second lien" lenders, owed €350m attending the event.
Holders of less well secured bonds and other "out of the money" lenders were not invited to the event.
In a follow-up statement Eircom said trading in the six months to the end of the year was worse than expected.
Cost-cutting is not enough to compensate for the slide in revenue, the company said.
According to sources at the meeting, management said the company was losing customers to leaner competitors like cable company UPC, and mobile operators Vodafone and 3 Mobile.
The firm said the fall-off in sales was being driven by a slowdown in the consumer and small business markets. Fixed and mobile sales are in decline.
Lenders last night questioned whether management was doing enough to tackle aggressive poaching of customers.