Eircom's debts given negative outlook by ratings agency Fitch

RATINGS AGENCY Fitch has attached a B- with a negative outlook rating on Eircom’s debts after it emerged from examinership recently following a consensual debt restructuring with lenders.

This indicates that while financial commitments are currently being met, Eircom’s capacity for continued payment is vulnerable to deterioration in the business and economic environment.

Fitch has also put a B/RR3 recovery rating on Eircom’s senior secured debt of €2.35 billion. This indicates “good recovery prospects” given that Eircom has already defaulted on its loans.

The ratings have been assigned to Moceir Holdings (Ireland) Ltd, which trades as Eircom.

The negative outlook reflected the “considerable operating challenges” connected with turning around the fixed-line business, Fitch said.

“Its weak competitive position relative to the cable operator UPC may lead to further line losses beyond management’s expectations,” the agency added.

It said this could potentially lead to “further covenant breaches” and possibly further restructuring.

Fitch noted that statistics from ComReg show Eircom has a 56 per cent share of fixed-lines revenues from the 1.6 million homes here.

This share has fallen by about 10 percentage points in the past two years. Eircom was “most challenged” in the urban residential market, where UPC has focused its investment, Fitch said.