Eircom in default, warns swaps body

Eircom is technically in default, triggering the payment of credit-default swaps, according to the International Swaps and Derivatives Association.

Credit-default swaps on Eircom Group Ltd’s parent, ERC Ireland Finance Ltd, will be settled after the association said there has been a failure-to-pay credit event.

The International Swaps and Derivatives Asso-ciation’s determinations committee ruled that an auction will be held “in respect to outstanding credit-default swaps transactions”, it said in a statement.

There were 2,080 swaps contracts covering a net €221m of the Dublin-based phone company’s debt as of Mar 9, according to the Depository Trust and Clearing Corp-oration, which runs a central registry for the market.

ERC Ireland Finance was cut to “selective default” from “CC” by Standard & Poor’s last month after the company missed a coupon payment on its floating-rate notes.

Eircom, seeking to restructure €3.75bn of debt, may seek protection from creditors as early as this month, three people with knowledge of the matter said last month.

Eircom said last week that it supports “in principle” a restructuring proposal submitted by a group of first-lien, or most senior, lenders.

They proposed writing off 15% of their loans, double the amount previously planned, in exchange for full control of the company.

The first-lien lenders, led by two Blackstone Group units, envisage second-lien lenders recovering €35m, or 10%, of their loans, with more junior creditors losing virtually all of their investment, according to the people.

— Bloomberg