Eircom Examinership?

jmcc

Wonder what this means for broadband in Ireland and whether it will go through?

http://www.independent.ie/business/irish/eircom-tightlipped-over-report-it-may-opt-for-examinership-2840548.html

Regards...jmcc

Sponge Bob

The article appeared in the Indo....and is therefore highly suspect.

eircom is a UK registered company and is more likely to opt for what is called an administration over there, especially the "prepack" variety.

Of course if what the Indo says is true then eircoms negotiations with their debt holders are not going well and if eircom are planning an examinership/administration one wonders whether they are negotiating in good faith with their debt holders.

eircoms suppliers are not being paid as promptly as was once the case ...or so I hear. Their outstanding invoices would be wiped out in a prepack.

But there is no question but that eircom need to offload at least €2-€2.5bn of debt in very short order, if this is the only way then they will have to go for it. If they emerge from a prepack with a lesser debt burden they can invest more, for a change.

Once they breach their debt covenants, expected at the end of August, the current directors may lose control to the extent that they cannot opt for a prepack any more. I haven't read the legal mumbo jumbo myself.

Sponge Bob

Interesting note on eircom here

http://www.scribd.com/doc/58816995/Thoughts-on-Eircom-Irvin-Schlussel

Who owns what:

This is all based on conversations and press stories and is probably dynamic. I have spoken with the financial advisors and attorneys for all three relevant classes to piece this together.


1 st lien bank debt holders committee:
Harbourmaster, Avoca, Blackrock,Alcentra and Deutsche Bank, GSO, Mitusbishi. This group owns 30% of the 1stlien. I am told that other than GSO this group is all banks and CLO’s. I think thisgroup would like to avoid taking a haircut as it could trigger a write-down on their balance sheet or return of capital.



2nd Lien bank debt holder committee:
This committee is comprised of DuetscheBank special situations group, Silverpoint and a couple of other large HedgeFunds. This group owns almost 60% of the 2nd lien and 20% of the 1st lien. Ithink this ownership will allow it to have a strong position in the restructuring.



FRN’s:
This is a hedge fund holder base comprised of four funds owing almost50%The attorney representing the 1st lien Lenders at K&E mentioned that his class
“was CLO heavy and that should speak to their motivations”.

This fact would be in favor workout scenario #1-3 as the CLOs and banks would like to avoid an event of defaultwhich would require them to make distributions to their investors and give up fees or mark down a holding. The advisor to the 1st mentioned to me that the objective of his committee “is to get their money back and not to take the company”. It is possible that they would be willing to sell cheap optionally on the upside to STT who would take the equity in a new structure via an amend and extend in conjunction with scenario number

jmcc

So it could well end up in a fire sale? No wonder Eircom was using its shills in the press to push that story about the fibre tests.

Regards...jmcc

Sponge Bob

The fibre tests are an each way bet really, They prove the need for cash to invest as much as anything else.