Wednesday 13 November 2019

Eircom hires Lehman's lawyers ahead of debt restructuring talks

Donal O'Donovan

Donal O'Donovan

EIRCOM has hired US consultants Alvarez & Marsal as external advisers as the company gets ready to thrash out a debt restructuring agreement with lenders in the coming weeks.

The hire is the latest sign that Eircom is becoming a magnet for international bankers and lawyers, with seven separate teams set to be in place when restructuring talks get under way in earnest.

Under debt market rules all lenders in restructuring talks can demand to have the cost of hiring advisers paid for by the debtor company.

The latest hire is Alvarez & Marsal. The firm was most famously put in charge of Lehman Brothers after the investment bank collapsed owing $34bn in 2008, triggering the global financial crisis.

The same advisers took control of accountancy firm Arthur Anderson when it collapsed after the Enron scandal.

At Lehman Brothers and Arthur Anderson, Alvarez & Marsal ended up taking complete control of the client companies.

The Eircom role is much more limited with Alvarez & Marsal providing external advice to Mark Wilson, the interim chief financial officer appointed in January.

The engagement was confidential but was confirmed by a spokesman for Eircom last night in response to a question from the Irish Independent.

The spokesman said Alvaraz & Marsal has been working with the company for the past month. Its role is in addition to the banking advice already being provided to the Eircom board by US investment banks JPMorgan and Gleacher Shacklock.

Irish law firm Arthur Cox is also advising Eircom.

Advisers are being drafted in after Eircom CEO Paul Donovan warned that the company is in danger of breaching the terms of its debt.

The latest hire brings the tally of outside firms acting on Eircom close to double figures as a huge assortment of parties prepare to lock horns in talks on tackling Eircom's €3.75bn debt pile.


US investment bank Houlihan Lokey and London lawyers Kirkland & Ellis are advising the most senior set of Eircom lenders, who are owed €2.6bn. The group includes Dublin hedge funds Harbourmaster and Avoca.

US law firm Cadwalader, Wickersham & Taft is advising bondholders owed €350m, and UK law firm Ropes & Gray is acting for the most junior lenders -- owed around €600m in so-called payment-in-kind notes -- lending where all of the interest all has to be paid when the original debt falls due.

Eircom's part owner STT is being advised by London law firm Freshfields. Singapore's state-owned STT owns 50pc of the company that ultimately controls Eircom, alongside the Eircom shareholder employee trust (ESOT). Both the ESOT and a fourth set of lenders are likely to have advisers when the talks get under way.

On top of all the advisers, lenders are understood to have commissioned an independent business review, which will be done by external accountants.

That on its own could add another million to the ultimate advisors bill, a source involved said, even though it will go over much of the same ground as Eircom's own business plan.

Irish Independent

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