Two New York hedge funds are set to secure a €300 million special dividend in Eir as a result of a refinancing at the telecoms group, The Irish Times has learned.
Anchorage Capital and Davidson Kempner built up large positions in Eir following the group's debt restructuring in 2012 after it found itself subject to the State's largest-ever examinership. They retained a combined 35.5 per cent holding after two companies owned by French billionaire Xavier Niel, took a controlling 64.5 per cent interest in the business.
Debt ratings agency Standard & Poor’s said in a note on Tuesday after Eir announced a plan to raise €850 million through the sale of new bonds and a new debt facility that the company planned to pay a €300 million dividend to shareholders.
Sources have said, however, that only Anchorage, which owns 26.6 per cent of Eir, and Davidson Kempner, which holds a further 8.9 per cent, will share the money, as they enjoy more favourable terms under the shareholder agreement.
Mr Niel’s private investment vehicle NJJ and his publicly-quoted company Iliad, which completed their purchase of a 64.5 per cent stake in the Irish company almost 13 months ago, are not taking money out at this time. A spokesman for Eir declined to comment.
Bond refinancing
Eir plans to use most of the new debt to be raised within the next week refinancing €700 million of existing bonds that are due to mature in 2020, with the remainder being used to cover fees tied to the transaction and bolstering its cash position.
However, some of the funds, together with cash on the balance sheet, will be used to pay the special dividend, according to sources. The company will have about €50 million of cash on its balance sheet after the transaction, they said. However, they added that the company is now generating more than €200 million of free cash a year, double what it was making at the time of the takeover.
Eir’s examinership in 2012 was the result of the group racking up an unsustainable level of €4.1 billion of borrowings following a series of changes of control after the State floated the business – previously called both Telecom Éireann and Eircom – on the stock market in 1999.
Under the rescue plan, some 40 per cent of debt mountain was written off, while its most senior lenders, then led by US investment firm Blackstone, seized control of the business.
Sources said that the move by Anchorage and Davidson Kempner to extract hundreds of millions of euro of dividends at this stage does not have any impact on Eir’s plans, announced last September, to invest €1 billion in a high-speed fibre-to-the-home broadband network in the Republic over the course of five years.
