THE HIGH Court yesterday gave the green light to the appointment of an interim examiner at Eircom and associated companies to seek to implement a consensual restructuring of its €4.1 billion gross debts.
Michael McAteer of Grant Thornton has been charged with finalising a scheme that has already been largely approved by senior creditors and will result in Eircom’s debts being reduced to €2.34 billion.
Ownership of the company would also transfer to the lenders.
Mr Justice Peter Kelly afforded the protection of the court to Eircom, its mobile arm Meteor and its treasury division Irish Telecommunications Investments Ltd for the period of the interim examinership.
He set April 18th as the date for a hearing on a full examinership, a process that protects companies from creditors for up to 100 days.
He noted that while Eircom was trading profitably, its profits were declining and it also had significant capital expenditure commitments relating to a next generation fibre network that would allow it to keep pace with developments in the telecoms market.
The judge said Eircom was not in a position to service its debts and that the group was insolvent. He was satisfied examinership would “give a better out-turn for creditors than a receivership or a winding up”. Based on the evidence, there was a “reasonable prospect of survival for the company”. He was satisfied the pre-petition liabilities of the company could be paid from the normal cash flows of its business.
Following the ruling, Eircom said its objective was to place the company’s balance sheet on a stable financial footing for the medium to long term, with reduced debt. Chief executive Paul Donovan stressed it was “business as usual” for the telco.
Eircom has written to its 1.1 million customers, 3,000 suppliers, and to other stakeholders, including TDs and Senators, to reassure them that services will not be affected. A national media campaign explaining the current situation will launch today.
Documents filed with the court relating to the petition for examinership show Eircom has reduced its non-capital expenditure related costs by more than €300 million.
The group anticipates further cost reductions of more than €70 million in the two years to June 2013. Capital expenditure of €1.3 billion is anticipated for the period of the five-year business plan up to mid 2017. Of this, about €400 million relates to investment in its next generation network rollout, which has already begun on a pilot basis.
It is forecast Meteor’s capital expenditure is likely to average €45 million over the five years. It will have to bid for spectrum in an upcoming licence auction to be held by regulator ComReg. Details of the amount needed for this were not revealed.
In addition to the reduced debt Eircom will hold on completion of the restructuring, provision has been made for it to obtain a super senior revolving credit facility for up to €150 million for liquidity and working capital purposes.
