Eircom offers main lenders 20pc stake in the company plus €300m
EIRCOM'S owners are offering 20pc of the company to its biggest lenders, according to sources close to the situation. The deal includes around €300m in cash payments and will allow shareholders to keep control of the company.
The top-ranked lenders are owed €2.36bn and are considering the offer, but they see it as the first move in what is set to be a long process. Other lenders, who are owed €1.3bn, will lose everything under the plan.
This is the first time that a substantial restructuring proposal has been made, more than a year after moves to tackle the company's unsustainable €3.7bn of debt got under way.
Specialist newswire Capital Structure says the proposal has been backed by both Singapore-based STT -- which owns two-thirds of Eircom -- and the employee shareholder trust that owns the rest. If it succeeds, the current shareholders will keep a majority stake.
A spokeswoman for STT and representatives of the employee shareholder trust declined to comment.
The Irish Independent understands that the proposal has been put to a six-member co-ordinating committee representing the top-ranked lenders. That committee wants to flush out and then weigh up alternative offers, before canvassing opinion from the full group of lenders.
The top-ranked lenders are a mix of over 200 global investment funds and banks, making co-ordination crucial to a smooth negotiating process.
The current proposal asks senior lenders to accept a 20pc stake in the company in exchange for writing off just 8pc of what they are owed.
In addition, the company will write a cheque for €300m, which will be used to repay around 11pc of the top-ranked loans early. Eighty per cent of the €2.36bn will then be reinstated as new debt, due for repayment later than the current 2013-2014 maturity dates.
The deal would slash nearly €1.5bn off Eircom's debt. Shareholders are hoping that it will put the company back on a sound financial footing.
The proposal is a sign that the Eircom talks are heating up. It comes just days after new independent directors were appointed to the board to help move along its long-expected debt restructuring.
Even if a deal is hammered out, execution could be fraught. Any restructuring that leaves some lenders empty-handed is sure to be opposed and will ultimately have to be forced through in the courts.