Eircom set to go into examinership

Eircom is expected to go into examinership in the coming days, with its debt-holders ultimately likely to take ownership of the firm in the longer-term.

The telecommunications company, which has had six different owners over the past 12 years or so, has been working on a major restructuring of its €3.75bn debt for a number of months and effectively put itself up for sale again last month.

However, two weeks ago, management said that it had decided to support a debt restructuring proposal from its senior lenders.

All of Eircom’s lenders had until 5pm yesterday to vote on proposals, with an approval rate of over 50% required to pass the recommendations.

With Eircom’s latest debt arrangement waiver running out on Saturday, the result is likely to see the company going into examinership today or tomorrow — with Grant Thornton expected to be appointed examiner.

The new deal is likely to see around €1bn of the total debt written off, meaning shareholders/employees will lose out, as well as around a third of its lenders.

Approximately €2.7bn is owed to Eircom’s senior lenders and two-thirds of the lenders are likely to take ‘haircuts’ on their loans of between 10% and 15%, with the debt maturity being extended by three or four years.

Earlier this year, the chairman of Eircom’s employee share ownership trust warned members that they could lose their shareholding as part of any overall debt restructuring deal.

A sale of Eircom has increasingly been seen as unlikely given a number of factors — including the extent of its borrowings, the drop in demand for landlines and the company’s inability to be able to invest in keeping up with a competitive marketplace.

Its chief executive Paul Donovan is to step down at the end of this year for personal reasons it was announced earlier this week.

Mr Donovan said that the role of chief executive requires a multi-year commitment, which he isn’t in a position to meet, but he added that it had been a “privilege” to lead the former state-owned company.

Ned Sullivan, the company’s chairman, said that real progress had been made in transforming the business since Mr Donovan’s arrival three years ago and that “a clear strategy now underpins the group as we progress towards a sustainable future.”