Monday 19 March 2018

Lenders say Eircom can invest €1.4b as they give two-year ownership promise

Laura Noonan

Laura Noonan

THE lenders set to take control of Eircom have agreed to let the telecoms giant invest €1.4bn in infrastructure over the next five years and have committed to retaining their ownership of the company for at least two years.

Details of the lenders' plans emerged last night after Eircom's examiner Michael McAteer announced he had signed an "implementation" agreement with the group, ending the takeover hopes of 3 Ireland owner Hutchinson Whampoa.

A lengthy 'scheme of arrangements' for the deal, which will see €1.8bn of debt lifted from Eircom and its group companies, was sent to creditors yesterday ahead of a meeting on Friday.

The proposals are likely to face opposition from a group who are owed €350m in junior debt known as 'floating rate notes' or FRNs. The FRNs would have received €50m under the rejected Hutchison deal, but will get nothing under the plan that has been accepted by Mr McAteer.

Even if they vote against it, the scheme is still expected to pass the creditors' meeting since groups representing the major lenders have already indicated their support.

The FRNs or any other dissenters will also be able to object to the scheme when it comes before the High Court on May 23 and 24. Assuming it is accepted, the High Court will set a date for Eircom to exit examinership over the summer.


Ireland's largest telecoms company will then become owned by a group of hundreds of banks and investment vehicles, including Alcentra, Avoca, Deutsche Bank, GSO, Harbourmaster and Sumitomo Mitsui Banking Corporation.

The most senior lenders, who are owed more than €2.7bn, have agreed to write off 15pc of their debts, while a group of 'second lien' creditors owed €355m will lose 90pc of their debt.

The lenders will all get an ownership stake in Eircom proportionate to their remaining debt. The Irish Independent understands that they have agreed to a "lock-up" period of two years, and have endorsed a five-year financial plan.

Eircom's chief executive Paul Donovan has already announced that he will leave before the end of the year; the remainder of his team is expected to stay in place. Yesterday's creditors' documents show that no directorship changes are planned.

The plan endorsed by lenders allows for €1.4bn of Eircom's earnings to be reinvested, with the spend "front-loaded" to the next few years.

Hutchinson hadn't spelled out what it would have invested, as it had not had advanced discussions with the examiner.

Its plan was rejected partly because the bid would have been worse for most creditors. There were also concerns about Hutchinson's ability to complete, since a bid would have gone to European regulators who could have taken several months to decide.

Irish Independent

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