EIRCOM owner Singapore Technologies Telemedia (STT) has dramatically pulled all of its directors off the Eircom board. It comes as the company moves closer to being taken over by its most well secured lenders.
A second group of lenders owed €350m say they will make a revised bid for the business in January.
Three STT-linked directors resigned from the nine-member Eircom board after an influential group of Eircom's lenders blocked a €200m offer from STT to retain control of the business.
The STT proposal was rejected following an informal vote by the lenders, according to people involved.
First lien lenders
The top-ranked "first lien" lenders rejected STT's proposal, in large part over a controversial clause that would have allowed the shareholder to get repaid ahead of lenders if Ireland leaves the euro next year.
STT and an Eircom's employee shareholder trust (ESOT) remain the owners of Eircom but only until lenders seize control of the company, which is expected to happen next year.
Eircom has debts of €3.75bn, including ��2.36bn to the top-ranked "first lien" lenders. The company has breached the conditions on the "first lien" debt, and its managers and owners have acknowledged that the debt burden is not sustainable.
"We are disappointed that the first lien co-ordinating committee did not engage with us at all on this second proposal," said Terry Clontz, STT's most senior executive in Europe and a former Eircom director.
"We extend our sincere best wishes to the company, the management and employees of Eircom in their ongoing efforts in building a sustainable and successful Eircom," he said,
In a statement, Eircom said its remaining directors would continue with "detailed discussions" with representatives of the first-lien lenders, regarding their alternative proposals to take control of the group.
The first-lien lenders have offered to write off 8pc of the €2.36bn that they are owed in exchange for taking control of Eircom.
They will need to go to court to ask a judge to agree to force losses on other lenders owed €1.35bn -- a move they argue is needed to return the company to financial viability.
Trying to inflict such large losses on other investors may mean forcing Eircom through an examinership process.
A group of less well secured "second lien" lenders owed €350m said yesterday that it would make a fresh takeover proposal for Eircom in January, after its earlier offer was rejected.
The "second lien" group will offer to absorb some of the losses that would fall on more senior lenders, if they are allowed to join the current first-line bid, a source said.
Meanwhile, investment bank Morgan Stanley is preparing an Eircom sales memorandum for distribution to potential trade buyers within weeks.
The sales pack is unlikely to drum up any new bids but could be an important piece of evidence for valuing the business in any examinership process; the data circulated to potential buyers is also expected to include up-to-date sales and profit and loss figures.
Sources say there is unlikely to be any move to seize control of Eircom until Morgan Stanley has concluded its effort.