Investors pile into €500m Eir bond as telco cuts interest bill
Published 08/06/2016 | 02:30
Eir has tapped the bond market for €500m - 42pc more than the €350m it originally sought - as investor demand boosted the size of the offer.
The telco has also slashed its interest bill as a result.
It will use the proceeds to retire more expensive debt and the move will save it €17m a year in interest.
Eir, formerly Eircom, is 40pc-owned by New York-based private equity group Anchorage, and had previously flagged that it intended to address the existing €350m in high yield notes on its books. They carry a 9.25pc interest rate and were set to mature in 2020.
The new notes sold yesterday carry a substantially lower interest rate of 4.5pc. They'll mature in 2022.
The proceeds will be used to refinance the existing €350m senior secured notes on its books, and the incremental proceeds will be used to repay part of Eir's senior debt facility, which stands at about €2bn.
Eir chief executive Richard Moat said that the execution of the company's strategy over the past three years had delivered a "strong turnaround performance" in the business.
"The successful outcome of this transaction reflects market acknowledgement of our progress, and the significant appetite which exists to invest in our company," he added.
Eir has also secured approval from its lenders to introduce a new €150m revolving credit facility (RCF), which the group said strengthens its liquidity resources. Chief financial officer Huib Costermans had indicated in April that Eir intended to target a debt re-engineering.
"These transactions reflect the improvement of our financial performance and the positive future outlook for the business," he said yesterday.
"The bond refinancing aligns the maturity date of all of our securities in 2022, and will generate close to €17m in annual interest savings.
"Together with the RCF that we are putting in place, we have secured much greater flexibility in our capital structure."
Ratings agency Fitch endorsed the bond and RCF transactions this week, but pointed out that transaction and break fees will have a negative impact on Eir's financial results for the current financial year that ends this month.
In April, Eir reported that its revenue in the third quarter rise 3pc to €321m, and that pre-exceptional earnings before interest, tax, depreciation and amortisation (EBITDA) was 4pc higher at €125m in the period.
That was the fourth consecutive quarter of revenue and earnings growth.
Mr Moat also said in April that a new stock market listing of Eir was now "at least" two years away.
The company had an initial public offering in its sights in 2014. But it pulled the plans, arguing that the business had started to improve. However, investors are thought not to have been satisfied with the high valuation that was placed on the business at the time.
Eir is the latest Irish company to issue fresh bonds to re-profile its debt.
Last week, the DAA, which operates Dublin and Cork airports, said it's issuing a €400m bond. That's attracting an interest rate of about 1.9pc - much lower than the 6.58pc rate on an existing bond, more than half of which is being redeemed.
A day before, the ESB announced that it had issued a new €600m bond, the proceeds of which would be used to redeem €300m of outstanding notes. The new bond was issued with an interest rate of just under 1.9pc.