Sunday 24 September 2017

Saga takes another twist as Eircom suitors challenge move

Tim Healy

DOUBTS have been cast over plans by Eircom's examiner to finalise a survival scheme to hand the business to creditors by the end of this week, following an unprecedented legal intervention at the Commercial Court.

New York-based bond investor DW Investment Management and Hong Kong-based Hutchison Whampoa, which owns 3 Mobile, yesterday launched a legal challenge to disrupt the scheme, following last week's decision by Eircom examiner Michael McAteer to reject their €2bn cash offer for Eircom.

DW Investment Management represents 52.4pc of a group of Eircom creditors owed €350m of its €4bn of debt. They face a 100pc loss under the proposed scheme of arrangement for Eircom and related companies.

In court yesterday they claimed to be unfairly prejudiced by the scheme, because an alternative offer from Hutchison Whampoa would see them receive a €50m payment.

Hutchison Whampoa has alleged that "lock-in" restructuring proposals for the Eircom companies agreed between the companies and senior creditors around the time of the examiner's appointment damaged its efforts to buy the business, and effectively pre-determined the success of the proposed scheme of arrangement.

The case will be back in front of the Commercial Court today.

The applicants want a letter sent from Morgan Stanley, on behalf of Mr McAteer, advising Hutchison Whampoa that the examiner would not proceed with their bid, retracted.

They are also seeking a direction requiring the examiner to postpone meetings of the Eircom creditors this Friday.

Unprecedented

When the matter was mentioned to Mr Justice Peter Kelly at the Commercial Court yesterday, he told Michael Cush, for the applicants, he had never heard of an application like it. Mr Cush agreed it was unprecedented.

Justice Kelly agreed to allow the application be served at short notice on the examiner and other affected parties, and returned the matter to today.

The applicants want to force the examiner to engage with them as a potential buyer for Eircom. They are also seeking access to Eircom's management team, to the electronic data room containing information relating to the Eircom companies and to a business report prepared by Ernst & Young.

They also want access to due diligence material and a valuation report prepared for the examiner.

Other directions sought would require the examiner to give the applicants a copy of the agreement entered into between the Eircom companies and their senior creditors.

The latest twist could defer Friday's meetings of creditors in Dublin where the examiner intended to outline scheme of arrangement proposals which would then be put before the Commercial Court for approval.

The scheme was expected to receive the necessary support from creditors as they had already agreed to its terms in principle before the examinership process commenced on March 29.

The proposed agreement provides for debt reorganisation and changes in equity ownership to allow Eircom exit examinership.

The entire issued share capital of Eircom Ltd is to be transferred to Bidco, an entity established on behalf of the secured senior lenders.

The first lien senior lenders are to have their €2.7bn debts reduced by 15pc while second lien creditors will have their €350m borrowings cut by 90pc.

Irish Independent

Also in Business