Eircom creditors back debt reduction

EIRCOM MOVED a step closer to exiting examinership successfully yesterday after its creditors gave the necessary support to a scheme of arrangement that will reduce the company’s gross debts to €2.35 billion from the current level of €4 billion.

All of the first lien and second lien lenders who voted on the scheme yesterday gave their support to the examiner’s proposals.

It is understood the floating rate noteholders (FRNs), who are owed €350 million, did not support the scheme.

The FRNs stand to be wiped out in the proposed debt restructuring.

The FRNs, along with mobile operator 3 Ireland and its Hong Kong parent group Hutchison Whampoa, were unsuccessful on Thursday in a High Court legal action to delay the examinership process.

This followed a recent decision by the examiner to reject a €2 billion cash offer by 3 and Hutchison for Eircom.

This offer would have involved a €50 million payment to the FRNs in settlement of their debts.

The FRNs – namely, DW Investment Management LP – and 3/Hutchison had argued that the examiner, Michael McAteer of Grant Thornton, had not given due consideration to the offer for Eircom.

Mr Justice Peter Kelly rejected their claims and refused to intervene in deferring the creditors’ meetings that were held in Dublin yesterday.

The first lien lenders who supported the scheme yesterday represented 70 per cent of the value of their €2.7 billion loans and 66 per cent in terms of the number of lenders.

The second lien who supported the scheme represented 72 per cent of the value of the €350 million in loans and 56 per cent by number.

Mr McAteer is expected to return to the Commercial Court on Monday to provide it with an update on the outcome of the creditors’ meetings.

Counsel for the examiner might also request a date from Mr Justice Kelly for a confirmation hearing to be held next week.

It remains to be seen whether the FRNs or any other group of lenders seek to challenge the scheme next week.

Under the consensual arrangement with lenders, Eircom’s debt holders have agreed to a five-year rescheduling of the company’s borrowings.

The first lien lenders will take a 15 per cent hair cut on their loans and take 100 per cent ownership of Eircom’s equity.

The examinership covers Eircom Ltd, Meteor Mobile Communications and Irish Telecommunications Investments Ltd.