Danish fund manager Advice Capital has accused Irish incumbent Eircom of failing to drive a consensual agreement with bondholders to restructure €3.75bn (US$4.9bn) of its debt.
Eircom declined to comment on the accusations.
Advice Capital, which…
Danish fund manager Advice Capital has accused Irish incumbent Eircom of failing to drive a consensual agreement with bondholders to restructure €3.75bn (US$4.9bn) of its debt.
Eircom declined to comment on the accusations.
Advice Capital, which holds 4% of the fixed line operator’s €350m (US$456m) of subordinated floating rate notes (FRN), could see its debt wiped out if the company enters the Irish equivalent of US Chapter 11 bankruptcy protection, called Examinership.
“We fail to see why Eircom’s stakeholders haven’t tried to make a consensual agreement before taking the company through Examinership or a UK court. Debt restructuring through an Examinership or a UK Scheme of Arrangement should be the last resort after having exhausted all other options,” said Frederik Foged Dreyer-Nielsen, a portfolio manager with Advice Capital.
“We trust that an Examiner or UK court will acknowledge that Eircom’s stakeholders haven’t even tried to contact the involved bondholders, let alone negotiate debt restructuring on a voluntary basis.”
Bondholders met in London today to discuss proposals to restructure Eircom, after a sales process that was run by Morgan Stanley to bring in a third party expired on 12 March.
One proposal being looked at was put forward by Advice Capital on 7 March 2012.
According to Dreyer-Nielsen, Advice Capital’s proposal would decrease €1.3bn (US$1.7bn) of net debt and mean the company can avoid being forced into Examinership. This proposal would see €2.4bn (US$3.1bn) of first lien debt either being refinanced or left whole and prolonged until 2016, second lien debt cut by €140m (US$180m) and offered profit-sharing up to €140m, more junior debt cut by €860m (US$1.1bn) and a previous offer by shareholders to inject €300m (US$391m) accepted.
The plan was up against a proposal also being tabled today by US-based Blackstone Group’s asset management business. Blackstone GSO, which is already a major lender to Eircom, intends to increase its commitment by €150m (US$195m) in return for a refinancing of its old loans and a share of the ownership of the company.
In a statement following the meeting, Eircom stated that it was “in principle supportive of a revised proposal submitted by the Coordinating Committee of the First Lien Senior Lenders (FLCC) … The Company will continue to work with the FLCC to finalise this revised proposal as the next step in the balance sheet remediation process to provide a sustainable capital structure for the group.”
Eircom is currently 65% owned by investor group Singapore Technologies Telemedia (STT) and 35% owned by employee share trust ESOT.
Dreyer-Nielsen said his firm was prompted to wade into the restructuring talks after Eircom failed to make a €5.7m (US$7m) interest payment on 15 February without warning. Advice Capital is currently in talks with other FRN bondholders about legal proceedings against the company. Dreyer-Nielsen said the company plans to launch legal proceedings against the operator over the missed payment after a grace period expires tomorrow.
Houlihan Lokey is advising first lien lenders that hold €2.4bn (US$3.1bn) of debt, Moelis is advising its second lien debtors that hold €350m (US$456m). Cadwalader, Wickersham & Taft LLP is advising a steering committee representing FRN notes totalling €350m, and Hawkpoint is advising PIK lenders that hold €700m (US$911m) of debt.
