Suvival plan for Eircom expected to be approved at creditors meeting after High Court decision
A SURVIVAL plan for Eircom is expected to be approved at creditors meetings tomorrow after the High Court today rejected what was described, by the companies and their examiner, as an attempt by a competitor to "derail" the examinership process.
Hutchison Whampoa Ltd, parent company of mobile phone operator 3 Ireland, had applied to the court to defer the meetings after alleging its indicative offer for Eircom was not properly considered by examiner Michael McAteer and it should be permitted "a proper appraisal" of its offer.
The application was also by New York-based DW Investment Management LP, claiming to represent more than 50pc creditors of Eircom holding €350m Floating Rate Notes, but that claim was disputed by the companies, examiner and senior creditors who alleged DW was joined to the case in an effort to give Hutchison the necessary legal standing.
The joint application came after the examiner last week rejected the revised €2bn cash offer for Eircom from 3 Ireland and HWP and said no further offers would be considered. He is recommending restructuring proposals and a five year business plan - the senior offer - supported by senior creditors and the companies.
Mr McAteer, examiner to Eircom Ltd, Meteor Mobile Communications Ltd and Irish Telecommunications Investments Ltd, will recommend those proposals at creditors meetings today. If, as expected, creditors approve the plan today, it will then have to secure High Court approval.
Mr Justice Peter Kelly yesterday refused an application for orders deferring the creditors meetings and requiring the examiner to withdraw his refusal to admit Hutchison to phase two of the process providing for due diligence and the making of final binding offers. He also refused to make orders for disclosure of information on the companies to Hutchison.
The judge, noting this was the largest examinership in the history of the State affecting almost 6,000 workers, said the orders sought were "unprecedented" and would effectively involve the court in exercising a commercial judgment and micro-managing an examinership which the court was not permitted, and did not have the expertise, to do.
The court's role in examinerships was supervisory, it could only interfere if an examiner misbehaved or breached the law and it could not intervene in the examiner's exercise of commercial judgment. He believed the court could only intervene in very limited circumstances in relation to the behaviour of an examiner.
He was also satisfied the applicants fell "far short" of showing the examiner had done something so utterly unnecessary or absurd that no reasonable man would have done the same, he added. While he would not go into the detail of the proposal advanced by Huitchison, he was satisfied the examiner had identified numerous shortcomings in that proposal allowing him to refuse to allow Hutchison move to phase two.
There was a reasonable basis for that refusal, he found.
Not least of the problems identified in the Hutchison proposal was that of getting regulatory consent for its offer and the examiner was entitled to take the view regulatory consent for a bid by Hutchison could not be obtained within the maximum examinership period of 100 days.
The examiner should also not be criticised for moving as fast as possible in this examinership, he added. While there seemed to be a tendency now to have examinerhsips run for the maximum 100 days, that was the outside limit and the law contemplated much shorter periods.
Examiners were required to formulate a scheme of arrangement as soon as practicable and Mr McAteer, who was appointed on March 30th last, should not be criticised for his enthusiasm in carrying out his obligations, the judge said. Hutchison had complained Mr McAteer had applied unnecessarily stringent time limits and that, as the examinership was in its 51st day today, there remained sufficient time for it to be admitted to phase two.
The judge also said court protection sterilises the entitlements of creditors and that should be done for the shortest period necessary.
It was desirable Mr McAteer move quickly as the existence of examinership creates difficulties for companies, their employees and creditors and allowed competitors take advantage of their fragility, he added.
Rachel Channing, Communications Director of 3 Ireland, said afterwards the company was disappointed with the decision. The company had sought direction from the court in order that its offer for Eircom be given due consideration, she said.