Eircom to face its debt demons; a glimpse into Aldi’s business methods; the allure of unmanned petrol stations; insuring your pet – with Tesco
Eircom in talks on financial reshape plan
AFTER MONTHS of speculation and conjecture, the horse-trading at Eircom over a financial restructuring has finally begun.
The company yesterday began talks with a group representing first lien lenders, who are owed a net €2.36 billion. In total, Eircom has net debt of about €3.7 billion. It’s an eye-watering figure for a company whose core business is in decline in a small, recession-hit country.
The additional money is held by second lien lenders, FRN note holders and Pik note holders. Negotiating with all these groups will take some time and won’t be easy.
Eircom will publish its full-year results in August, when it is expected to confirm it has breached its loan covenants. A deal on a restructuring before then seems unlikely. So some form of waiver or standstill is likely while the talks take place.
Eircom’s business plan is key to its future. This will have placed a value on the business, which, in turn, will help to determine the level of write-off required from lenders.
The consensus view is that a haircut north of €1 billion will be needed.
The FRNs and Piks are most at risk given the discounts that already apply to their debts.
The business plan is also key to persuading Eircom’s shareholders – Singapore’s STT and the employee Esot – to inject additional equity. This could be as much as €300 million.
My understanding is that the business plan outlines the investment required for Eircom’s creaking network to bring it up to snuff. This is of the order of hundreds of millions of euro.
Before putting any money into Eircom, it is understood that STT wants clarity on the debt situation and some comfort from Government about the regulatory framework here.
The Singaporeans, it seems, are of the view that the regulatory situation is too favourable to Eircom’s competitors and that a level playing field doesn’t exist.
This is particularly so when it comes to cable television operator UPC, which has been snapping up broadband and telephone customers over the past 18 months or so with competitive pricing.
Eircom’s problems are well documented. Previous owners loaded it with debt for their own gain and it was starved of meaningful investment. This is an opportunity to address some of those issues but we shouldn’t expect the lenders to go quietly into the night.
Demise of 'NOTW' leaves gap in Sunday market
NEWS CORPORATION'S decision to announce the closure of the News of the Worldnot surprisingly left its 22 full-time staff in Ireland stunned yesterday.
They were left wandering the corridors wondering what the future would hold for them.
This is not the best time to be laid off in the media industry here, as staff at the Sunday Tribuneand Irish Daily Star Sundaywould no doubt attest.
In fact, the Starmust be cursing its luck. Its recently departed Sunday edition would surely have been a beneficiary of the NOTW's demise.
Instead, the Sunday Worldlooks like the most likely newspaper to pick up some extra sales.
Like it or not, the NOTWwas a big player in the Irish Sunday newspaper market. And not just because it had Bertie Ahern on the payroll.
Its latest circulation figures showed a sale of 113,000 in May. This was on a par with the Sunday Times, News Corp's quality broadsheet sister title.
It was also some 10,000 copies ahead of the Daily Mail's Sunday edition.
In recent years, the NOTWfilled out its newsroom in Dublin and put in place a subbing desk. This was meant to eliminate the cultural nuances that were often lost on the subs team in London.
The decision by the Murdochs to close the 168-year-old newspaper was seismic.
The scandal that has engulfed the NOTWthreatened to permanently tarnish the Murdochs' legacy and define them in the most unacceptable terms.
What now for News Corp in terms of a Sunday tabloid newspaper title? How will it fill this gap?
A clue might be found in the move to register the sunonsunday.co.uk address on the web in recent days.
It seems a logical move, given the strength of the Sunbrand. It's the bestselling tabloid here, shifting 81,000 copies a day.
Whether that will translate into Sunday sales remains to be seen.
It didn't happen for the Irish Daily Star. But the Murdochs are a determined lot. It will be fascinating to watch.
Where self-service is the final frontier
Santry: A Final Frontier. This is a story of the Great Gas filling station. Its recession-time mission: to boldly go where no unmanned station has gone before. And sell petrol.
Great Gas managing director Ray O’Sullivan might be no Captain Kirk, but he’s on a voyage of discovery to see whether Irish consumers will buy petrol at his unmanned filling station in Santry, where only diesel has been available up to now.
This follows a change in legislation that makes it possible for forecourt operators to sell petrol at self-service stations too.
Great Gas was first to market with a “pay-at-the-pump” forecourt, which opened in Santry two years ago with the assistance of Tokheim, an international group involved in about 20,000 such stations around Europe.
O’Sullivan tells me turnover in Santry is just under €5 million a year. It handles about 400 cars, vans and trucks a day, and he expects this to increase now that petrol is available on the site. He wants to open more of these stations, and argues that they will help to reduce motor costs over time.
“We’re well advanced with plans to open three more outlets around the country in the coming year and we are also open to approaches from other forecourt owners who are interested in partnering with us,” he said.
Anything that might save us a few bob has got to be worth trying, but I fancy most motorists will still want some human interaction.
Grocery report sheds some light on Aldi
INFORMATION ON Aldi’s operations in Ireland is thin on the ground. But there were a few interesting nuggets in the report published this week by John Travers, who was appointed by the government last year to try to draft a voluntary code of practice governing the trading relationship between grocery retailers and their suppliers.
Travers met Aldi this day last year.
Donald Mackay of Aldi told him that the German discounter had opened 77 stores by that date in Ireland, with plans for another three or four by the end of the year. He said Aldi’s strategy was to “foster long-term relationships with its Irish supply base” and said it sourced 45 per cent of its grocery goods from producers here.
“It is actively seeking to grow this by 10 per cent,” Travers’ report said.
“Aldi advised that its modus operandi was based on striking a price with its suppliers following a keen engagement and sticking to that price,” the report added.
“Aldi advised that suppliers deliver products to its distribution centre and Aldi takes it from there and does not engage in seeking payments for spillages, wastage, etc.”
Aldi also told Travers that it did not expect its suppliers to provide products for promotional campaigns at prices less than those originally agreed.
Aldi objected to the introduction of a code, arguing that it could add to its cost base.
“Aldi was concerned that it should not have to pay for the indiscretions of others,” the report noted.
Tesco's pet insurance scheme for cats and dogs
IT HAS previously innovated by bringing us 24-hour shopping, online deliveries, credit cards, mobile phones, car insurance and, most recently, free eye tests.
Now Tesco is offering pet insurance for cats and dogs to its Irish customer base.
Launched this week and underwritten by Dundrum-based insurer RSA, the product is being promoted as a way for pet owners to remove the “added stress of high vet bills”.
“There’ll be quite a suite of things coming along that will keep refreshing what Tesco can bring to the marketplace,” chief executive Tony Keohane told me this week.
The retailer recently opened an opticians in its Naas and Balbriggan stores, offering free eye tests and other services.
“We intend to roll that out to more locations,” he added.
Tesco has been offering pet cover in Britain for some time so Ireland was a logical extension.
Two products are available – its value policy provides cover up to €2,500 per condition, while the standard one covers vet fees up to €4,000 per condition.
Tesco Clubcard holders will get a 5 per cent discount and earn points on the products.
The animal has to be at least eight weeks old and no more than eight years old, which seems ageist. Owners will even get 24-hour access to a Vetfone helpline.
Woof.
Little things
BERNARD MALLEE, press adviser to Minister for Enterprise Batt O’Keeffe in the last government, has joined Dan Pender’s crew at Pender PR.
Pender, himself a former ministerial press adviser, has also recruited Amanda Glancy, formerly of Matheson Ormsby Prentice and Fine Gael.
Pender this week picked up the account for Cork-based multinational EMC, in a pitch that also included WHPR and Fleishman.
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UK HAULAGE group Stobart is another of Pender’s clients.
Stobart invested in the rescue last year of Aer Arann, with an eye to the Irish airline providing flights into its London-Southend airport.
After a long wait, Stobart has received the green light to begin rail services to Liverpool Street in central London from July 18th.
This is good news for Aer Arann passengers flying there from Waterford and Galway.
They will now be able to travel to London from Southend Airport in about 50 minutes. Easy Jet also flies to Southend.
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YET MORE recruitment by Barclays Bank in Ireland. The bank has hired Martin Cass from stockbroker NCB, where he was a director in its wealth management division.
Cass will start in August and have the title of vice-president.
This follows hot on the heels of Nicky English’s recruitment from AIB Investment Managers and the appointment of Scot Andrew Hastings as chief executive.
