Bloomberg News

Eircom’s Senior Lenders May Gain 25% Stake in Debt-Equity Swap

September 30, 2011

Sept. 30 (Bloomberg) -- Eircom Group Ltd. may cede a quarter of its shares to first-lien lenders in a debt restructuring of Ireland’s biggest phone company, according to three people familiar with the talks.

As part of the debt-for-equity swap proposal, senior creditors would agree to write off some of their 2.36 billion euros ($3.2 billion) of holdings for a 15 to 25 percent stake, said the people, who declined to comment, because talks are still at an early stage.

Eircom, saddled with 3.75 billion euros of debt following five ownership changes in the last 12 years, said Sept. 15 its senior lenders agreed to waive debt terms for three months as it seeks to restructure its balance sheet. The company, owned by Singapore Technologies Telemedia Pte. and an employee trust, is pursuing in excess of 1.3 billion euros of debt writedowns across its lenders, the people said.

Holders of payment-in-kind securities, owed 643 million euros, bondholders due 350 million euros of floating-rate notes and second-lien creditors owed 350 million euros, will bear the brunt of burden-sharing, according to the people.

The Dublin-based company has cut its earnings before interest, tax, depreciation and amortization forecast for the coming years to as low about 550 million euros, from in excess of 600 million euros, previously, two people said June 16.

Eircom may file for protection from creditors through a pre-packaged administration in a U.K. court, a pre-arranged plan between a company and certain creditors to reorganize debt, five people said. Another option is Irish examinership, where a company secures court protection for a maximum of 100 days as it seeks to restructuring its debts. A restructuring agreement may take months, the people said.

Eircom’s owners are expected to inject new equity of 250 million euros to 300 million euros into the company as part of a debt agreement, two of the people said.

Melinda Tan, a spokeswoman for STT, and a spokesman for the Eircom’s employee trust declined to comment on the talks.

Eircom spokesman Paul Bradley wasn’t immediately available for comment. A spokesman for the coordinating committee of senior lenders declined to comment.

--Editor: Cecile Gutscher, Dara Doyle

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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