EIRCOM’S INDEPENDENT directors will meet on Monday to discuss the implications of yesterday’s decision by Singapore-based majority shareholder ST Telemedia (STT) not to meet the extended deadline for submitting a proposal on restructuring the company’s €3.7 billion net debt.
This decision, which surprised most observers of this long-running saga, has left the directors with two proposals to consider.
One is from senior lenders, who are owed about €2.4 billion, and the other is from second-lien bondholders, who face having their debts either substantially reduced or entirely wiped out in any restructuring.
Eircom’s directors yesterday moved to seek an extension from its lenders to a waiver on the company’s banking covenants, which were breached in the summer.
They have sought an extension until January 31st of the current waiver, which expires on December 15th.
STT, which owns close to two-thirds of Eircom, had been expected to put forward a proposal in conjunction with the Employee Share Ownership Trust, which holds the balances of shares.
This was expected to have involved STT and the trust investing €300 million and offering 20 per cent of the equity to first-lien lenders, who would also have taken an 8 per cent haircut on their loans.
But the Singapore group has chosen not to participate in the restructuring at this point, although it indicated it might come back at a later date.
“Owing to the continuing macro-economic uncertainty in the euro zone, ST Telemedia has not submitted a proposal,” it said yesterday. “We continue to monitor and evaluate our investment position, and remain in discussion with the company and the FLCC .”
In a statement, the independent directors said they would evaluate the two proposals and submit a report to the board of Eircom. It is not clear when this will happen but sources suggest it could be next week. The board will then hold talks with the first-lien lenders to “seek agreement on a course of action”.
The directors did not comment on the proposals put forward by the lenders, citing confidentiality. However, the first-lien lenders are believed to have submitted a proposal that would involve them taking full ownership of the business, while writing down their debts by 7 to 9 per cent.
They would also agree to extend the maturity of the debt to September 2017 while the company would have access to its near €400 million cash reserves for investment purposes.
Eircom’s directors said talks “between management and all parties would continue to take place”.
It is understood they still hope to receive a proposal from STT, who they regard as an important strategic investor.
Paul Donovan, Eircom’s chief executive, said: “While the current shareholders have not yet submitted a proposal, the independent directors and management will continue to encourage both shareholders to do so.
“However, the immediate priority is to ensure that practical progress with regard to the balance sheet remediation process takes place, working with the support of the FLCC.”
