Eircom's examiner finalises scheme

EIRCOM’S EXAMINER has finalised a scheme of arrangement with the company’s lenders that he hopes will allow the company to exit examinership.

He has notified creditors of his plans to call a meeting in Dublin on May 18th to outline the proposals that he will then take to the Commerical Court for approval.

The scheme is expected to receive the necessary support from creditors given that they had already agreed to its terms in principle before the examinership process commenced on March 29th.

This move follows the decision of the examiner, Michael McAteer of Grant Thornton, on Thursday evening to reject a revised €2 billion cash offer for Eircom from mobile phone operator 3 Ireland and its Hong Kong parent company Hutchison Whampoa.

The so-called implementation agreement outlines the proposed debt reorganisation and changes in equity ownership to allow Eircom to exit examinership.

They relate to Eircom, its mobile arm Meteor and ITI, a treasury subsidiary.

The entire issued share capital of Eircom Ltd is to be transferred to Bidco, an entity established on behalf of the secured senior lenders.

In effect, the first lien senior lenders are to have their €2.7 billion debts reduced by 15 per cent.

Second lien creditors will have their €350 million in borrowings reduced by 90 per cent.

Eircom’s gross debts will be reduced from about €4 billion to €2.35 billion.

The floating rate noteholders, who are owed about €350 million, will not receive a dividend and will have their debt “extinguished”, according to the scheme document.

The payment-in-kind noteholders will also be wiped out. They are owed about €670 million.

The new owners have specified certain conditions for the future management of the group and “indicated that they will recruit directors with relevant expertise”.

The scheme document estimates Eircom’s assets at €2.4 billion and its liabilities at €4.1 billion.

It estimates there would be a deficit of €3.1 billion as regards creditors in the event of a liquidation.

In a statement yesterday, Mr McAteer said he was “pleased” that the scheme with lenders had been finalised.

“An implementation agreement has been signed, scheme proposals have been issued and I have convened creditors’ meetings which will be held next Friday 18th May 2012 where these proposals will considered by the company’s creditors,” he said.

Mr McAteer said no other proposal would now be considered for Eircom.

“This is an important step in the process which will hopefully allow Eircom Ltd, Meteor Mobile Communications Ltd and Irish Telecommunications Investments Ltd to successfully exit the examinership process in the coming weeks.”

Last Sunday, 3 Ireland revised its offer for Eircom, eliminating all conditionality, except for due diligence.

However, Mr McAteer rejected the offer, with the support of lenders, on the basis of valuation and the conditionality.