Bloomberg News

Eircom Said to Weigh Seeking Over 1 Billion Euro Debt Writeoffs

June 16, 2011

June 16 (Bloomberg) -- Eircom Group Ltd., the Irish telecoms company, may ask lenders to write off more than 1 billion euros ($1.4 billion) of debt, according to two people familiar with the situation.

The Dublin-based company will seek haircuts on payment-in- kind securities and floating-rate notes, according to one of the people, who declined to be identified because the company has not yet formally engaged with creditors. Second-lien creditors may be offered equity for accepting a discount. It isn’t clear whether first-lien lenders will be affected, the person said.

Eircom, saddled with 3.75 billion euros of debt following five changes in ownership in the last 12 years, said last month it as “very optimistic” it can resolve its debt situation this year, even as it warned of a likely breach in financial covenants within three months. Moody’s Investors Service this month downgraded ERC Ireland Finance Ltd, parent of the company, and warned of a possible default on debt.

Eircom has cut its earnings forecasts, according to the two people. The company had earlier projected earnings before interest, tax, depreciation and amortization of more than 600 million euros in coming years, the people said. Now, it has cut its forecasts to as low as about 550 million euros, said one of the people. It is not known when the cuts were made.

“The company has no comment regarding speculation concerning any proposal regarding the balance sheet,” said Paul Bradley, a spokesman for Eircom, by telephone. “At our recent third-quarter results, the company stated that we will make a proposal to lenders in due course. At that time, we also guided that there would be an acceleration in EBITDA decline.”

Liens

Taken over last year by Singapore Technologies Telemedia Pte and a trust owned by current and former Eircom employees, the company had 2.36 billion euros of first lien debt, according to results released on May 27.

Eircom also has 350 million euros of second-lien borrowings, 350 million euros of floating-rate notes and 643 million euros of payment-in-kind notes at the end of March.

Eircom’s owners will also be expected to provide new equity to the company as part of a capital restructuring, the two people said.

Eircom, advised externally by JPMorgan Chase & Co. and Gleacher Shacklock & Co. Inc., expects to “shortly” agree terms of engagement with a committee formed to represent senior creditors in talks on a restructuring of debt, Bradley said on June 14.

--Editors: Dara Doyle, Cecile Gutscher

To contact the reporter on this story: Joe Brennan in Dublin at jbrennan29@bloomberg.net;

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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