Tuesday 16 January 2018

Eircom in talks with lenders over €3.7bn debt

Donal O'Donovan and John Mulligan

EIRCOM is meeting its main lenders today for the first round of talks that will ultimately see the company's €3.7bn in debts restructured.

Today's meeting is to allow management to present a new business plan to lenders, but the substantive issue of the debt is ostensibly not up for discussion. However, lenders last night said they would raise the matter when they meet Eircom management in London.

Over 100 banks and funds that hold Eircom's most senior debt are entitled to attend today's meeting.

But there is understood to be tension between some holders of second lien loans, who feel their interests are not being pressed by a lender committee that only features holders of higher-ranked first lien loans.

First lien debt accounts for nearly €2.4bn of Eircom's overall debt pile, while second lien accounts for just a relatively small slice.

Eircom chief executive Paul Donovan refused yesterday to be drawn on the specifics of the meeting, and stressed that any balance sheet remediation that might eventually occur was a matter for shareholders and lenders to hammer out.


He said the figures being shown to lenders today were based on the expectation that there would be a continuing decline in revenue and EBITDA at the former state-owned telco.

"It's still really, really difficult out there," he said of the economic environment, adding that intense competition also continued to weigh on the group.

A number of lenders want to discuss the possibility of Eircom seeking a waiver of the conditions on its loans at the end of August. The company is expected to miss the terms when the results of a test are revealed. If it does the company will be in default, which would shift debt negotiations into a much messier phase.

To prevent that happening, Eircom has an option to "cure" covenant breach by pumping cash into the business to make up any shortfall in earnings. The company has the money, but lenders say that would be a waste of cash, given their willingness to facilitate a deal. Some senior lenders say they would be willing to grant the waiver if certain conditions are met. One group -- holding €600m of a mix of first and second lien loans -- wants an extra seat at the negotiating table, while others may seek a cash fee for granting the waiver.

Down the line, lenders think Eircom needs to walk away from nearly €1bn of debt in order to be put back on a sustainable footing.

They say that could be done by transferring some companies in the group to the UK and taking a case under English law.

Irish Independent

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