ONE MORE THING:NEW YEAR, new sales process at Eircom. The difference this time around is that majority shareholder, Singapore-based ST Telemedia, is not at the table negotiating. There seems little prospect of that position changing by mid-March, the deadline set for Morgan Stanley to round up expressions of interest in the debt-laden business.
Might Denis O’Brien and Digicel return to the process? It doesn’t seem likely. O’Brien didn’t hang around long enough last time to table an offer formally. Why would he come back now?
To recap, Eircom’s debts are roughly €3.6 billion. About €3 billion of that is owed to first lien senior lenders and second lien senior bondholders. Both of these groups put forward proposals to the company before Christmas but these have not been acted upon by the Ned Sullivan-led board of the telco.
It’s seems fair to surmise that neither was a knockout offer for the board. Besides, the prospect of having more than 200 lenders as shareholders cannot exactly be appealing to the board.
The chance of a new suitor emerging for Eircom seems slim, unless the bondholders, the first lien in particular, were willing to take a substantial write-down on their debt. There’s been no hint of that to date. It would be some feat for Morgan Stanley to persuade an overseas group to invest in the heavily-indebted telecom incumbent in recession-hit Ireland when the future of the euro is in doubt.
Quite what debt load Eircom might be able to bear in the future is up for debate. Some argue that it could bear debts of about €2 billion, just under four times its Ebitda for fiscal 2013. Others argue that it has to be substantially less, particularly as the Ebitda is a moveable feast in the current recessionary climate.
More likely is that this is another step on the road to examinership or administration to find a solution to Eircom’s so-called “balance sheet remediation”. The sooner the better.
