Sunday 19 May 2019

High Court to rule on Eircom’s examinership tomorrow

Eircom headquarters 1HSQ
Eircom headquarters 1HSQ
The old Eircom building on Stephen's Green
Eircom employees will not be affected by the insolvency process, as long as the company can emerge from examinership reporters and Donal O’Donovan

THE High Court will give its decision tomorrow on the application from embattled Eircom for an examinership - in a move that would be the biggest of its kind in Irish corporate history.

The company has asked the court to appoint an interim examiner to it and two related companies – Meteor and ITI.

Eircom is saddled with €3.8bn in debt.

The company employs over 5,000 people and the court was told that 1,000 job losses would be necessary at the firm over the next five years.

The redundancies have been flagged by Eircom in the past.

Examinership protects company assets from creditors for up to 100 days while a survival plan is devised to keep the business afloat.

The new proposal for the company will mean stripping owners STT and an employee-shareholder trust of their stake in Eircom and handing the shares to top-ranked lenders that are owed €2.4bn.

In exchange, they will write off 15pc of what they are owed and give the company longer to repay the rest.

They also want to force a write-off of €1.35bn of debt owed to other lenders, including all of the €1bn owed to unsecured bond holders and holders of Payment In Kind (PIK) notes or IOUs.

"Second lien" lenders owed €350m will receive a 10c in the euro payout for backing the plan -- otherwise they risk a total wipeout.

The plan was given the nod by a 200-strong group of lenders yesterday.

The biggest single shareholder will be US private equity house Blackstone. They will have the only stake of more than 10pc in the company.

Managers and top lenders have backed the plans but bondholders due to lose €1bn are considering legal options to block the process.

The most likely route would be to challenge the examinership proposal when it is formally put to the court.

At that stage any creditor can object to a scheme being proposed.

The most likely challenge will be from bondholders, who may say the scheme unfairly deprives them of cash.

US law firm Cadwaladar and London's Ropes & Grey are known to be studying the matter for the bondholders.

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