Business Irish

Monday 19 March 2018

Eircom pins hopes on second sale as firm struggles with €3.7bn debt

Company considers formal auction process after initial November 18 takeover deadline attracts just one offer

Donal O'Donovan

EIRCOM is considering putting itself up for sale for the second time in a month, the Irish Independent has learned.

It comes after the crisis-hit company received just one takeover offer when an initial deadline for bids closed on November 18.

The Irish Independent has learned that investment bankers from Morgan Stanley are preparing a sales memorandum for Eircom as part of a formal auction process being considered by company directors.

It's the latest twist in the long-running struggle between Eircom's owners and lenders to the company over how to write off at least €1bn of its €3.7bn of debt.

Lenders that stand to suffer huge losses say that writing off debt means they should get control of the company, while Eircom's current owners are working on a proposal to buy their way back into the business.

All sides have been deadlocked for months.

The November 18 deadline was meant to force the crisis to a head, but just one lender-led proposal was on the table when the deadline closed. Directors had hoped there would have been three.

The deadline has been extended until the end of this week to allow majority owner STT to table an offer. But there is an increasing fear that STT -- which paid just €30m for control of Eircom -- could walk away from the battered company.

The Irish Independent understands that investment bankers from Morgan Stanley are preparing a completely separate sales process.

Instead of calling for debt restructuring proposals it would run more like a normal auction.

Eircom refused to comment on the news but Morgan Stanley has already been in the process of preparing a valuation report for Eircom.

This takes that valuation process a step further by actively seeking bids from telecoms companies and private equity houses.

The likes of Vodafone, BT and 02 that already have operations here are likely to be the first targeted with the offer. Last night one lender said that an auction process was unlikely to lead to any new bids.

Anyone interested in Eircom would have come forward by now, he added.

The lender said he feared that the auction was being planned in order to help prove in court that Eircom was worth less than the sum of its debts, because only a low offer or even no offer is likely to result from the fresh auction.

In an examinership, a low offer or the lack of interest would back up any plan to force losses on debt holders.

Irish Independent

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