Eircom, senior lenders fail to agree on terms for talks
TALKS between Eircom and its most important lenders have yet to begin, a spokesman confirmed last night.
It comes almost six weeks after the company admitted its debt burden is too big for the business to support over the longer term and said it needed to sit down with banks.
The company and senior lenders that are owed €2.6bn agree that talks are needed to tackle the company's debt crisis, but have so far failed to actually agree the terms for the talks.
In May, Eircom boss Paul Donovan said he hoped to have made progress on the substantive issue by the end of July. That deadline now looks optimistic.
Talks have been delayed because the company and the lenders cannot agree formal terms of engagement covering issues like adviser fees and confidentiality.
Until that happens a committee representing the senior bondholders is treated as an "ad hoc" arrangement by Eircom, even though the lenders themselves are happy with their structure.
More junior lenders have not been invited to participate in talks with the company, leading to speculation a less favourable settlement will be forced on them by a combination of senior lenders and shareholders once those sides reach a deal.
Eircom has plenty of cash to meet interest payments on all parts of its debt but is set to breach the terms, or covenants, on the most senior loans in August. That means it needs senior lenders onside with any debt restructuring proposal or will end up in default, but gives it greater freedom to keep less well secured lenders such as bondholders at arm's length.
A spokesman for Eircom said talks with the senior lenders are expected to get under way shortly but cannot start until agreement on how to treat the flow of information needed to move forward with a restructuring proposal is hammered out.
The spokesman rejected reports that Eircom has a proposal ready that includes writing off up to €1bn of debt.
"There is no proposal at this stage," he said.
Eircom's debt has been drifting weaker in the secondary market since the end of May.