Monday 24 July 2017

Eircom lenders seek fee in return for easing debt terms

Donal O'Donovan

Donal O'Donovan

LENDERS to Eircom want a fee for temporarily easing the terms of its debt and have called for changes to the Eircom board structure in case of takeover approaches.

Eircom remains locked in negotiations with key lenders two weeks before a deadline for crucial covenant tests.

The company is seeking a waiver that will loosen conditions attached to its €3.75bn of debt. If the conditions are breached, that would technically be classed as a default -- leaving the company vulnerable to aggressive action by lenders.

Last night, a spokesman for the company said good progress was being made in talks. He declined to comment on the issues holding up the talks but admitted a deal on the waiver had yet to be agreed or formally put to lenders.

Eircom is likely to miss minimum revenue-to-debt ratios in the period to the end of June, and the results of the test are due to be revealed to lenders at the end of this month along with new financial results

According to two sources among the Eircom lenders, the two main sticking points holding up a deal are whether the company will pay a fee to its senior lenders for agreeing to a waiver, and a call for the board of the company to create a subcommittee of independent directors.

Eircom is asking lenders to waive the tests for a three-month period -- which would protect the company from falling into default and allow time for talks on tackling the bigger issue of how much debt Eircom can really afford to bear.

The fee being considered is likely to be between a half and 1pc of the €2.75bn owed to the most senior Eircom lenders -- the only loans that are protected by covenants.

A source said fees were paid around 95pc of the time when a waiver is granted.

Contention

The other point of contention has been brought up by lenders who want to make sure that any approach to buy the company from a third party will not be considered by directors appointed by the current owners.

The current talks are between the company and a coordinating committee representing the senior lender group. That's because once a deal is agreed on the terms of a waiver, it will have to be approved by 66.66pc of the senior lender group.

All sides are working toward having a deal in place by the end of the month, but sources among the lenders said that even if that proved impossible the process should remain consensual.

A waiver consent request can be sent electronically to lenders and votes can be returned by fax so there is no need to hold a meeting, but there is a fear that senior staff at banks and funds that hold Eircom debt may not be available to vote because of the time of year.

Even if the deadline is missed, a shorter-term interim agreement could be cobbled together that would prevent a debt crisis for the company while a waiver is finalised.

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