Tuesday 25 April 2017

Investor's stake sell-off to hand Anchorage sole control of Eir

Eir's risk profile has improved over the past few years
Eir's risk profile has improved over the past few years
John Mulligan

John Mulligan

One of Eir's biggest shareholders is selling its near 10pc stake in the telecoms business in a move which will see its largest investor, Anchorage Capital, gain sole voting control at the former state-owned company.

US hedge fund York Capital owns 9.8pc of Eir, formerly Eircom, while Anchorage Capital owns just under 40pc.

Anchorage will buy some of York's shares and will then gain over 50pc of the voting control at Eir's parent, Eircom Holdco, giving it sole control of the business.

It has notified the planned transaction to the Competition and Consumer Protection Commission, which must approve it.

During the summer, Singapore sovereign wealth fund GIC acquired a 16.3pc stake in Eir for about €230m. That placed a valuation of about €3.5bn on the telecoms firm.

Following York's imminent exit, three shareholders will own a majority of the equity in Eir - about 75pc.

Currently, Anchorage owns 36.9pc, while York owns 9.8pc. Another investor, Davidson Kempner, owns 11.8pc. GIC and Davidson Kempner are also buying some of York's shares in Eir. In a statement, Eir confirmed that Anchorage intends to lift its stake in the company. It said that the move is a "positive endorsement" of the group and its strategy.

Eir's risk profile has improved over the past few years. Prior to entering examinership in 2012, and exiting it the same year, the company's high-yield debt was a speculative lure for some investors.

But that debt profile has also changed, with its borrowings becoming cheaper to service.

In June, Eir issued a €500m bond, helping it to retire more expensive debt and saving it €17m a year in interest payments. Later that month, it issued an additional €200m of bonds.

Earlier this month, Eir secured agreement from lenders to cut the interest rate on €1.6bn of debt to 4pc from 4.5pc, saving it over €8m a year in interest payments.

There's been much speculation over the past couple of years about Eir's future.

Last year, a takeover approach was made by an unnamed suitor that valued the company at about €3.3bn.

But that approach was rejected by the Eir board, whose chief executive is Richard Moat, as undervaluing the business and its prospects.

Eir was poised to make a return to the stock market in 2014, but the flotation was pulled.

It's believed that some of its own investors said they did not support the move.

At the time, Eir said that it shareholders had expressed "their clear preference to continue participating in the upside from the significant network investment made in recent years".

Eir said that the impact of that investment was, at the time, only beginning to filter through to its results.

Last month, Eir reported that its revenue in the year ended in June rose 4pc to €1.3bn, while earnings before interest, tax, depreciation and amortisation were 5pc higher at €505m.

It was the first time in eight years that the company had recorded an increase in its annual turnover.

Irish Independent

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