THE PARENT company of Smart Telecom has breached financial covenants with lenders and is currently relying on extra funding provided by bondholders to remain in business, according to accounts just filed.
The accounts for Smart YuRoE Broadband Ltd, which were signed off on June 3rd and have just been lodged with the Companies Office, state that the telecoms group has been in breach of its covenants since 2007, with the result that the lenders “could call for immediate repayment” of €47.9 million in debt.
Smart is controlled by Cavan-based businessman and Kingspan shareholder Brendan Murtagh and his fellow investor Tom Jones.
The accounts indicate that Smart YuRoE owes its lenders €52.2 million in loans and accrued interest, with Mr Murtagh and Mr Jones providing guarantees for the repayment of this money.
The loans are owed to a group of bondholders, who comprise US institutions. The sum was originally due to be paid over five years to 2012. Interest of 15 per cent was charged on the loans, with a sum of €2.5 million accruing interest at a hefty 22 per cent a year.
“The directors . . . continue to be involved in negotiations with its lenders and, as yet, no demands for repayment have been received,” the accounts state.
Since the end of 2007, Smart has “incurred further trading losses and the current economic conditions create uncertainty over the ability of the group to achieve profitability and positive cash flows in the foreseeable future”.
According to the financial statements, the company is “dependent on the receipt of additional funding”.
It is understood that the bondholders have given Smart several million euro in additional funds since the beginning of 2009 to allow it continue trading.
Smart has undergone significant restructuring this year. This includes 30 redundancies and a refocusing of its business model towards corporate and government customers and away from residential. This is believed to have allowed Smart to bring in more cash than it is spending and to become “Ebitda positive”.
Smart YuRoE Broadband made a loss for the year to the end of December 2007 of €8.8 million, largely due to a write-off on an intercompany debt. It owed creditors €52.4 million at the end of the year. The company was owed €60.1 million by Smart Telecom Holdings Ltd, its main subsidiary.
Smart Telecom Holdings generated a loss of €19.6 million in 2007 and had net liabilities of €42 million. The 2007 accounts were qualified by auditors KPMG.
Earlier this year Mr Murtagh engaged advisers to seek an external investor for the business but this process appears to have yielded nothing.
Smart was founded in 2000 by Oisín Fanning and was once listed in London. It ran into financial difficulties in 2006, racking up losses of €55.6 million. That was the year when Smart’s fixed-line services were disconnected by Eircom.
