3's late bid just the latest in weird and wonderful Eircom story

ONE MORE THING:THE LATE bid by Hutchinson Whampoa and its Irish mobile arm 3 for Eircom has put the cat among the pigeons.

On the face of it, a €2 billion cash offer appears attractive for a company that is heavily indebted and requires a big cash injection to upgrade its network. But it carries conditions and could be blocked by Europe’s competition authorities.

With 100 days to execute a scheme of arrangement, Eircom’s examiner Michael McAteer is understandably nervous about asking Justice Peter Kelly to approve a deal with question marks attached.

There is also the prospect of the lenders pulling their support for the company, which would leave it in something of a pickle were regulators to ultimately reject the merger proposal.

For the examiner, a neater solution is to follow through on the scheme with lenders that has been in train for some time and is close to being signed off.

The lenders don’t appear too enthused either. The first lien prefer to stick with a plan that will see them take a 15 per cent haircut on their €2.7 billion in loans while also getting all of the equity in Eircom.

Under the examiner’s proposal, the second-lien lenders would get 10 per cent of the €350 million they are owed.

This tier of lenders would get nothing from Hutchinson/3’s bid.

The floating rate note holders and those with payment-in-kind loan notes – owed a combined €1 billion – face being wiped out under the examiner’s plan. Hutchison/3 has offered €50 million to the FRNs as part of its revised bid in an effort to win their support, a move that raised a few eyebrows.

Some wonder why Hutchison/3 left it so late to table an offer for Eircom. Morgan Stanley ran a sale process just before the examinership was put in train.

This might have something to do with the price being sought – thought to be €3 billion-plus. Hutchison/3 seems to value Eircom at €2 billion, end of story.

Goldman Sachs has advised the Hong Kong-based company on the bid. It has form with Eircom, having advised Sir Anthony O’Reilly’s Valentia on its takeover of Eircom and helped it to IPO.

Unless Goldman Sachs can pull a rabbit out of a hat in the next couple of days, the bid looks doomed. It will become a mere footnote in the weird and wonderful story of Eircom post privatisation.