Eircom’s lenders may write off debt and seize control

EIRCOM Group Ltd’s first-lien lenders may write off some debt and seize control of Ireland’s largest phone company under a restructuring that could supplant proposals by owner Singapore Technologies Telemedia (STT), according to two sources familiar with the matter.

Eircom’s most senior lenders would write off about 8% of the €2.36 billion they are owed by the Dublin-based company, said the sources, who declined to be identified as the talks are private. The plan was disclosed by a committee of first-lien lenders in a conference call on November 28 with a broader group of these creditors. The plan is a back-up if STT does not make an acceptable proposal, they said.

Eircom’s independent directors set an extended deadline of December 2 for debt restructuring pitches for the company, which is saddled with €3.75bn of borrowings following five ownership changes in the past 12 years. The company in September negotiated a three-month standstill on obligations to its senior lenders.

The first-lien blueprint would involve the company’s second-lien lenders and holders of floating-rate and payment-in-kind notes, who would lose almost all of the €1.3bn they are owed, the sources said.

It also entails extending maturities on senior debt.

An initial proposal by STT and Eircom minority shareholder, an employee share trust that owns 35% of the company, envisaged first-lien lenders taking a 15% to 25% stake in exchange for a partial debt write-down and debt-for-equity swap, sources said on September 30. The plan would see lenders absorb in excess of €1.3bn of losses, mainly borne by junior creditor classes, the people said at the time.

STT and the Eircom employee trust were also expected to provide €250 million to €300m of new equity, the people said at the time. The first-lien proposal involves no new equity, said sources familiar with their plan.

Eircom spokesman Paul Bradley and a spokesman for the company’s first-lien lenders each declined to comment.