€500m Eircom bond issue ‘on cards’

It is believed that Eircom plans to issue a high-yield bond at the beginning of March. The sale is being handled by the investment bank, Goldman Sachs.

A source said that the company will look to raise €500m and that some of the proceeds of the bond will form a dividend for shareholders.

Eircom declined to comment or give any details of the sale. “It is not our policy to comment on such matters,” said a company spokesperson.

The former state-owed telecoms company came out of examinership last June, with €1.8bn of debt wiped off its balance sheet. It still has a €2.3bn debt obligation.

The person familiar with the situation said the proposed issue next month will be in the high-yield corporate bond market, which is an expensive form of debt. It is not known what type of debt it will be replacing.

The private equity firm, Blackstone, is the largest shareholder in Eircom.

Last October, the company announced that it would be looking for 2,000 redundancies by 2014 in an effort to save €100m on a yearly basis. At the end of last year, the company had just over 5,700 employees.

The former state telco has had a troubled history since it was privatised in Jul1999. The share price collapsed when the telecoms bubble burst at the beginning of the last decade.

The businessman Tony O’Reilly took over the company, through his Valentia consortia, in 2001 through a €2.8bnhighly-leveraged buyout.

Since then it has been through a series of different owners, including the Australian firm, Babcock & Brown, and subsequently ST Telemedia.

ST Telemedia and the Employee Share Ownership Trust (ESOP) ceased to be shareholders following last year’s examinership.

The once-dominant player in Irish telecoms has seen its market share go into decline in the face of intense levels of competition.

Because of its high debt level it has been limited in its ability to invest in broadband and other key services.

According to its last set of results, Eircom’s revenues fell by €174m to €1.5bn for the 12 months to the end of Jun 2012. Earnings before interest and tax fell by €104m to €542m over the same period.

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