Eircom set to pay 9.5pc rate in new bond issue
Eircom is likely to pay a borrowing rate of 9.5pc to return to the bond markets, the Irish Independent has learned. The planned €310m deal is scheduled to close today, according to sources involved.
That is more than double what Eircom pays in interest on its €2.36bn of senior loans.
Eircom's current rate is a mix of 3pc paid in cash and 1pc in rolled-up interest, known as payment in kind; plus euribor, the interbank borrowing rate. At today's rates of a mere 0.2pc, euribor is a relatively minor part of the pricing.
Eircom plans to use the bulk of the €310m bond issue to repay part of its much cheaper senior loans. The firm will benefit because the new bonds due in 2020 have a longer maturity than the current loans.
After fees of €10m, the rest of the cash will be used to redeem €326m of the outstanding loans at 92c in the euro. It ultimately goes to Eircom shareholders. That is because Eircom's loans are owed to the same group of lenders who took ownership of the company last year.