Main lenders reject STT €200m plan to keep grip on Eircom
STT'S bid to buy its way back into Eircom has been shot down by a creditors' committee, despite backing from the company's main union.
Lenders last night terminated talks with the Eircom owners, just five days after STT made a surprise bid to retain control of the company in return for a €200m investment.
Yesterday, an influential co-ordinating committee that represents Eircom's most senior or "first lien" lenders rejected the proposal out of hand, according to sources close to the negotiations.
The six-member committee represents some 200 lenders owed €2.36bn of the €3.7bn owed by Eircom.
Committee members and their advisers told STT that the offer will not even be put to the wider lender syndicate for a vote, because of the degree of negative feedback from them , according to people close to the situation.
The committee has now terminated talks with STT.
The core lenders' objection is to a "material adverse change" (MAC) clause contained in the STT proposal. It would protect STT's investment at the expense of lenders if Ireland leaves the euro next year.
All sides say leaving the euro is unlikely, but lenders described STT's decision to include the MAC clause "extremely unhelpful."
The rejection means STT and an employee share trust now risk losing control of Eircom within months, unless they come back with a changed bid that is acceptable to lenders.
Eircom's independent directors will meet next week to consider the latest developments.
The news will be a blow not only to the shareholders, but to the Communications Workers Union (CWU) that threw its weight behind the STT restructuring proposal.
The CWU is the biggest union at Eircom.
Yesterday its general secretary Steve Fitzpatrick said STT's proposal should be implemented quickly in order to end the destabilising debt talks that have dragged on for more than a year.
"This (STT) proposal represents the best opportunity to rebuild Eircom and provide a secure future for its customers and its workforce. STT are the first telecommunications company to be involved in Eircom since its disastrous privatisation and there is little doubt that the company needs the industry know-how and technical ability that STT brings to the table," Fitzpatrick said in a statement.
If lenders had accepted an earlier, better bid put forward by STT in August the current impasse could have been avoided, he claimed.
The union is understood to have backed STT because it sees the Singapore state-owned shareholder as a strategic telecoms investors with expertise in the sector, unlike lenders that are the alternative owners for Eircom at this stage.
The union backed STT's proposal even though implementation of the plan would be almost certain to involve putting Eircom into examinership.
Examinership would not involve any additional risk to workers, beyond the current difficulties already being experienced, a source close to the unions said.