Sunday 19 November 2017

Eircom lenders may take control if two other bids miss the target


Donal O'Donovan

Donal O'Donovan

EIRCOM'S top lenders are still considering taking control of the company themselves if two other bids fall short of their expectations.

It means it could transpire that neither of the formal bids for Eircom, expected to be submitted tomorrow, could end up winning the takeover battle. The battle for Eircom is now a three-way tussle after Denis O'Brien pulled out of the race on Tuesday.

Eircom's so-called "first lien" lenders are owed €2.4bn and have a veto over the future of the company because Eircom has breached the covenants on the loans, and because the debt is the best secured of all of Eircom's €3.7bn of debt.

This group has agreed to consider takeover proposals due to be submitted tomorrow from other alternative bidders.

The top-ranked lenders will not submit a formal bid by the Friday deadline but sources among the group say they will seize control of Eircom if they are not convinced by the proposals that do emerge tomorrow.

News that the top lenders have their own "backstop" plan ready to come into play if offers fall short of their expectations keeps up the pressure on the bids that are being prepared.

Bids are expected from current Eircom owner STT and from a group of "second-lien" lenders that are facing losses of up to €350m if STT's offer is accepted.

This second-lien group is made up of heavy- hitting hedge funds and private equity houses: CVC Cordatus, Deutsche Bank (Distressed Products Group), Intermediate Capital, Invesco Global and Silver Point.

Both bidders are expected to have offers on the table when the deadline expires at close of business tomorrow, but behind-the-scenes talks are ongoing and there is a chance a joint bid could still emerge.

Once bids are in, Eircom's independent board members will evaluate the proposals and prepare a report to be passed on to the full Eircom board and the first-lien lenders.

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