EIRCOM’S SENIOR executives and other staff stand to receive up to 10 per cent of the company’s equity if Singapore-based STT’s proposal to restructure the company’s debts is accepted by lenders.
This emerged yesterday from sources close to the negotiations. The main beneficiaries would be chief executive Paul Donovan and other senior members of his executive team.
The Irish Times has also learned that STT’s proposal, which was tabled on Monday and involves an equity injection of €200 million, also includes a payment of €250 million to first-lien lenders as part of a restructuring of their debts.
This would comprise staggered payments out to 2015 under the guise of a “restructuring fee”. It is understood that these payments would be made from the company’s own resources. At the end of October, Eircom had €392 million cash on its balance sheet.
First-lien lenders are currently owed about €2.6 billion. Under STT’s proposal, this figure would be reduced to about €2 billion.
This equates to a principal impairment of about 25 per cent.
However, when the restructuring fee is factored into the equation, the haircut for lenders is effectively reduced to 13 per cent.
On Monday, STT, which currently owns 65 per cent of Eircom, put its proposal to the company’s independent directors, having previously missed two deadlines set for offers to be submitted.
Surprisingly, the proposal did not involve the employee Esot, which owns 35 per cent of Eircom. STT said it remained in discussions with Esot and indicated that the employee trust might yet participate in the proposal.
STT’s proposal is one of three now being considered by the independent directors. First-lien lenders and second-lien bondholders also submitted proposals.
Eircom’s independent directors met yesterday to weigh the offers.
It is not clear if they will seek clarifications from the various parties or when they might bring a recommendation to the board of Eircom.
The board would then be expected to make a recommendation to first-lien lenders, who will have a final say on any restructuring of the debts.
The process is expected to extend into the new year. Eircom is expected to provide an update today on whether its request for an extension on its covenant waiver from lenders, which expires today, has been granted.
Eircom has sought an extension until January 31st.
