Business Irish

Monday 18 December 2017

Lenders offered €57m to not block ESB deal

Donal O'Donovan

Donal O'Donovan

The Middle Eastern owners of Northern Ireland Electricity (NIE)'s parent company Viridian are offering junior lenders £50m (€57m) not to block a £1.034bn sale of most of NIE to the ESB. But junior lenders are seeking more cash, according to a source involved in the talks.

Bahrain-based investor Arcapita owns Viridian. It has agreed to sell the bulk of NIE to the ESB for £1.034bn. The sale needs the consent of senior and junior creditors owed around £1.8bn, because Viridian cannot fully repay the debt with the proceeds of the sale.

Viridian doesn't stand to make anything from the ESB deal but senior lenders are in line to be repaid close to £1bn of the proceeds. Junior lenders are pushing for more cash and know that without their support the whole deal can be blocked.

Arcapita is not liable for the debt itself but is understood to have offered to use £50m of its own money to get junior lenders onside. But the junior lenders want a share of the ESB money. That pitches the junior and senior lenders against each other. The most likely scenario now is a deal that allows some of the cash pot to flow to the juniors for agreeing to a smooth sale process.

None of the lenders will suffer a haircut under the current plan. They will take some cash upfront and continue to be owed the balance of their claims by either the ESB or the remaining Viridian business after the sale closes.

The junior lenders include Elliott Management, a hedge fund that specialises in investing in distressed debt cheaply and then aggressively forcing concessions from borrowers.

Arcapita bought Viridian in a debt-financed deal in 2007. Viridian is asking creditors to roll over any debt not repaid from the ESB deal for a longer term at a higher interest rate.

Irish Independent

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