Eircom future in balance as workers vote on cuts
Employees balloted on sweeping restructuring proposals aimed at saving €92m
Published 30/03/2011 | 05:00
Eircom's future could be thrown into disarray tomorrow if workers at the embattled company reject sweeping restructuring proposals designed to place the telco on a firmer financial footing.
About 5,000 ballots have to be submitted by close of business today by union members, about 82pc of who are members of the Communications Workers' Union (CWU).
Eircom employs about 7,200 people. The results of the ballot -- aimed at giving management the go-ahead to cut pay by 10pc through reduced working hours and initiate about 1,000 voluntary layoffs -- should be known by about lunchtime tomorrow when an independent auditor counts the CWU votes.
However, it is not clear that the workers will vote in favour of the restructuring despite their unions having endorsed the plans, which are aimed at saving €92m at the firm by 2013.
Eircom is trying to tackle its voluminous €3.8bn net debt and faces a covenant breach with lenders in coming months.
That looming breach can be remedied via a so-called "equity cure", with majority shareholder Singapore Technologies Telemedia (STT) and the Eircom Employee Share Ownership Trust (ESOT) able to make a cash payment -- likely to be between €40m and €50m -- that would, temporarily at least, prevent the breach occurring.
It has been rumoured that if the restructuring plan is pushed through that STT and the ESOT would agree to invest up to €300m between them -- €100m from the ESOT and €200m from STT -- in return for bondholders wiping out at least €600m in debt.
But lenders also want to see a highly detailed business plan -- including cost-cutting -- before agreeing to any financial re-engineering.
Eircom has engaged JPMorgan Chase and boutique firm Gleacher Shacklock to develop a long-term financial strategy for the company.
The proposals put to union members include a number of planned changes at the company, such as a review of subsistence rates and an 18-month pay freeze.
The CWU has warned its members that Eircom faces sliding into administration or receivership if they vote down the proposals. However, receivership would not be in the best interest of lenders.
Unions held meetings throughout March with Eircom workers to detail the restructuring plans. It is understood that the reception to the rescue plan was very mixed.
Eircom's fixed-line revenue has been in continuing decline, while its Meteor mobile arm has also been under pressure.
Overall revenue in the quarter ended last December fell 6pc to €438m while Eircom's adjusted earnings before interest, tax, depreciation and amortisation declined 3pc to €154m.