Eircom presents business plan to investors - key to €3.7bn debt restructure

bealtine

http://www.siliconrepublic.com/business/item/22938-investors-review-eircom/

ncumbent operator Eircom has taken a step closer to achieving the €3.65bn debt restructure it needs to reposition the company after management presented a business plan, that involves rolling fibre to 1m premises, to lenders at a meeting in London this morning.

Presenting the five-year business plan to shareholders is another necessary step Eircom needs to take in order to achieve the funding. Eircom shareholders are now reviewing the plan.

According to a spokesman, shareholders are reviewing possible alternatives for restructuring the company’s €3.7bn debt. More than 100 banks and funds that hold the most senior debt attended the meeting.

“This is one step closer to securing our future,” the spokesman said.

The business plan presented by Eircom notes the continuing difficulties in the Irish economy, including emigration and high unemployment, and the challenges caused by PSTN line losses and falling mobile revenues per user. The plan has been independently reviewed by Ernst & Young as part of the process.

The company’s difficulties are being exacerbated by Eircom’s uncompetitive cost structure compared with industry peers.
Eircom's five-year business plan

The business plan envisages the rollout of high-speed broadband and the development of fixed, mobile, broadband and TV services, a drive for increased mobile market share, an enhanced and open wholesale platform and improved business offerings, “all underpinned by further cost reductions.”

It includes multi-year rollout of a fibre network to about 1m homes and business premises, improved mobile coverage, an enhanced Wi-Fi network and more flexible and responsive IT systems.

Looking ahead at the rest of the year, Eircom said unaudited results for the fourth quarter show increased financial health in the fixed line business due to increases in fixed line prices, procurement savings and an 18-month 10pc pay cost reduction.

It expects fourth EBITDA (earnings before interest, taxes, depreciation and amortisation) to be around the same level as the third quarter.

Eircom’s mobile divisions are pointing to an increase in post-paid handsets driven by the launch of BlackBerry and iPhone, but pointed to a decrease in prepaid handsets. It expects a lower EBIDTA in the fourth quarter from mobile.

John Kennedy

bealtine

http://www.independent.ie/business/irish/eircom-will-talk-with-lenders-to-secure-covenantwaiver-consent-2835590.html

Eircom will talk with lenders to secure covenant-waiver consent


By Donal O'Donovan

Saturday July 30 2011

Eircom is ready to start talks with senior lenders as it seeks a "waiver" of some of the conditions of its loans.

The news came as Eircom managers met lenders yesterday and presented downbeat financial projections for the coming year at a meeting in London.

Eircom has debts of €3.75bn and is at the start of a process to "restructure" the debt, probably by writing off some unsecured bonds. Eircom is expected to breach the terms of its debt when they are tested and the results are published at the end of August.

The terms, or covenants, include strict rules setting out the minimum ratio of corporate earnings to total debt allowed at the business. Earnings at Eircom are falling sharply while debts are declining gradually.

Yesterday, Eircom confirmed for the first time it may seek the waiver consent.

"The company will commence discussions" to secure the waiver, "which may be required should a covenant breach occur", Eircom said.

Earnings in the year to the end of June 2012 would be "materially lower" than earlier figures indicated, it added.

Earnings

Eircom's shareholders could "cure" a covenant breach by investing fresh cash into the business in order to massage the earnings data.

Sources away from the company said shareholders could need to invest about €100m just to bring the firm into line with the loan conditions.

It is an unattractive option because it means paying in cash without getting any concessions from debt holders in return.

A source among the most senior lenders said shareholders did not need to go down such a drastic path, at what he regarded as an early stage in the proceedings.

He said many lenders were willing to grant a temporary waiver without seeking any cash commitment -- in exchange for a greater role in debt negotiations.

In order to secure a waiver, Eircom needs the support of two-thirds of senior lenders.

If they do grant a waiver, lenders want it to be temporary -- a matter of months at most.

The short-term option means they can maintain pressure on shareholders to pump a bigger amount of cash into the business in exchange for lenders consent to write off debt sitting below them in the capital structure.

Most senior lenders want the company to cancel about €1bn of unsecured debt. It sits below them in the capital structure, meaning it is less-well secured.

If a judge in Britain can be convinced there is no realistic hope of repaying all €3.75bn of debt, then it can be cancelled through a court process.

- Donal O'Donovan