Three bids for control of Eircom due as deadline looms large
Published 14/11/2011 | 05:00
THREE bids for control of Eircom are expected to be on the table when a deadline for takeover offers expires on Friday.
Current owners STT of Singapore, Denis O'Brien's Digicel and a group of lenders to Eircom are all vying for control of the company.
The bids from STT and from a group of so-called "second-lien" lenders who are owed €350m have already been tabled. Mr O'Brien is known to be weighing his own offer and now has just days to make his move for the company that he failed to buy in 2001.
Unlike conventional takeover battles, ownership of Eircom will be decided not by its owners but by its most well secured lenders.
That's because Eircom has breached the covenants on its corporate loans, and is overburdened with €3.7bn of debt.
That renders the company's equity effectively worthless.
Instead of making an offer to owners, each of the three bidders must convince top lenders owed €2.4bn that their proposals will give lenders the best hope of being paid back.
All three potential offers include forcing losses of more than €1bn on lower-ranked lenders to Eircom.
A report commissioned by Eircom agreed that huge loan write-offs were needed to put Eircom on a sound financial footing.
This week's bid deadline comes after more than a year of talks between the company and lenders failed to address the debt problems.
In September, a group of independent directors, including debt expert Bernard Somers, were appointed to the board of Eircom to speed up the process.
The new directors have acted quickly to put a shape on negotiations. Last week, "second-lien" lenders met the directors to flesh out their plan for the company, the Irish Independent has learned.
The directors set the November 18 deadline for bids.
Representatives from Digicel have also met with the Eircom directors -- but only after engaging with the top "first-lien" lenders, who will ultimately decide which of the three bids wins control.
News that Mr O'Brien's Digicel sat down with the top lenders before approaching Eircom is sure to be a blow to STT.
STT has offered to invest €300m into Eircom. Reports say STT has brought in UK-based investment fund CVR as a junior partner in the bid.
STT did not comment on the CVR report.
The "second-lien" lenders are offering to write off some of what they are owed in exchange for control of Eircom.
Digicel's offer has not yet been finalised.