eircom finally defaults

Sponge Bob

http://www.irishtimes.com/newspaper/finance/2012/0210/1224311575610.html

However they blame some of their lenders for their defaulting on some of their other lenders.

EIRCOM HAS agreed to withhold a €5.77 million coupon payment to its junior lenders following a request from its senior bondholders.
In a statement released late yesterday the telco said the payment suspension does not affect the continued operation of the group’s business. “All Eircom and Meteor services and payments to suppliers continue as normal.”

But that is a default. Plain and simple.

ANXIOUS

It was always going to happen. They will probably try and extend the debt.

HellFireClub

I thought when a default happens the sun stops rising and the moon falls straight out of the night time sky??? :rolleyes:

mike65

Its does appear to cause data loss.

HellFireClub

I'd be interested to know what the bad debtors book in Eircom is looking like. Imagine all of the small, medium & large businesses that have closed that had bills outstanding that could never be repaid, and all the folks who have left the country with outstanding bills, I imagine Eircom's bad debts within the last few years are playing no small part in the company's woes...

Sponge Bob

The data loss story is a well timed distraction from the default.

Sand

Interesting - If I recall correctly, one of the Liveline style arguments against the Irish state revoking the bank debt was that all Irish corporations ability to issue debtwould suffer.

Now that Irish corporations are themselves defaulting on their debt, doesnt that mean all Irish corporations ability to issue debt is totally screwed regardless of the taking on bank debt?

thebman

Sponge Bob wrote: »

The data loss story is a well timed distraction from the default.

Yeah it wasn't on the radio this morning, had the data loss story instead. I hate Irish media for this sort of nonsense.

Ignore the story that matters to talk about the issue that happens some company or other every day of the week.

Sand

thebman wrote: »

Yeah it wasn't on the radio this morning, had the data loss story instead. I hate Irish media for this sort of nonsense.

Ignore the story that matters to talk about the issue that happens some company or other every day of the week.

Id imagine the Irish media were falling over themselves to copy and paste the articles from the British media the last time some fool in the British civil service left his laptop on a train. The default story on the other hand would require...work.

Sponge Bob

The laptops with the emobile customer data NEVER left the office it seems. They were officebound.

Do eircom/meteor encrypt their desktop drives then?

jimmycrackcorm

Sand wrote: »

Interesting - If I recall correctly, one of the Liveline style arguments against the Irish state revoking the bank debt was that all Irish corporations ability to issue debtwould suffer.

Now that Irish corporations are themselves defaulting on their debt, doesnt that mean all Irish corporations ability to issue debt is totally screwed regardless of the taking on bank debt?

It wasn't private Irish companies being referred to but state companies such as the ESB

beeftotheheels

Sponge Bob wrote: »

http://www.irishtimes.com/newspaper/finance/2012/0210/1224311575610.html

However they blame some of their lenders for their defaulting on some of their other lenders.



But that is a default. Plain and simple.

Eh, that is how seniority is supposed to work. Senior lenders are, erhm, "senior" (i.e. they get first call on any cash), to junior lenders, who are junior (i.e. subordinated, only get a call on the cash after the senior lenders have been satisfied) to senior lenders.

The subordinated Liabilities Orders in respect of the Irish banks constituted a default under ISDA terms (there are many other definitions of default but let's stick to ISDA for now), but all applied to junior/ subordinated liabilities just as the Eircom default does.

Is there a discussion point here?

Since you posted in Irish Economy I assume you think it may have repercussions for an Irish Sovereign default. Officially Sovereigns don't have senior secured/ senior unsecured/ junior/ mezz etc lenders, although in practice the IMF may be senior under customary internationally law and EU bodies are generally senior under EU law which arguably makes them senior to the IMF when it comes to EU sovereigns in programs.

But in the corporate sphere where the senior lenders are in control, as in the Eircom case, they will generally (through a debt equity swap) take ownership of the company. Since Sovereigns only have classes of senior, do we really want our creditors taking ownership of us?

Not for a couple of years as the current program suggests, ownership, i.e. until they decide to exit (i.e. sell on the shares they acquired).

Sand

jimmycrackcorm wrote: »

It wasn't private Irish companies being referred to but state companies such as the ESB

Well that would make sense, except we were informed at the time that the people who invested in Irish bonds (of any sort) were uninformed, jealous yokels who couldnt tell the difference between the Irish government and a bank and a corporation. Let alone the difference between a privatised former semi-state and an actual semi-state. So none of them could be left to burn as then bond investors would abandon all the others. Now, after all the stupid decisions have been made and backed up to the hilt, its realised that actually investors can distinguish between various Irish corporations.

Ah well, lessons learned and all that.

@Beeftoheels

But in the corporate sphere where the senior lenders are in control, as in the Eircom case, they will generally (through a debt equity swap) take ownership of the company. Since Sovereigns only have classes of senior, do we really want our creditors taking ownership of us?

Does the ECB have an army? Because we do.

And no one is arguing for a sovereign default. Though some are certainly doing everything in their power to force a sovereign default.

oppenheimer1

HellFireClub wrote: »

I'd be interested to know what the bad debtors book in Eircom is looking like. Imagine all of the small, medium & large businesses that have closed that had bills outstanding that could never be repaid, and all the folks who have left the country with outstanding bills, I imagine Eircom's bad debts within the last few years are playing no small part in the company's woes...

I'd personally say they're playing a very small part. Eircoms woes are all entirely self inflicted. Asset stripping and leveraged buyouts are what has lead to todays situation.

If eircom went bust that might be no bad thing. We might actually get a telecommunications company that invests in its infrastructure, rather than one who struggles to pay off the debts its taken on in order to effectively buy itself on behalf of someone else, several times.

uncle_sam_ie

So what does this mean for me? Will I be better of with faster broadband or lucky to just have a working landline?

Damien360

oppenheimer1 wrote: »

I'd personally say they're playing a very small part. Eircoms woes are all entirely self inflicted. Asset stripping and leveraged buyouts are what has lead to todays situation.

If eircom went bust that might be no bad thing. We might actually get a telecommunications company that invests in its infrastructure, rather than one who struggles to pay off the debts its taken on in order to effectively buy itself on behalf of someone else, several times.

I agree with this but I have to ask. Can a PLC declare bankruptcy, get debt wiped and remain in buisness. It will have to come off stock exchange first and the shareholders will take a thumping. Is this permitted under stock exchange rules. Who can force this situation. do the debtors have this power and would they bother as there are no assets left to strip.

Is Ireland Inc (whats left of it) about to get dragged in to covering this debt in any way to preserve jobs and a national telco (I have a bad felling about this and think a minister could shag us all with this)

Sponge Bob

Not a plc since 2007. The senior lenders are obviously acting as shadow directors thouhh.

Farmer Pudsey

This is not about eircom going bust it has borrowed too much money the lenders know this so they have removed the company from the comtrol of its shareholders. They have stoped it from paying back unsecured lenders. The company is highly profitable with a bank balance of 300 million+.
All that will happen is that the company will have new owners in the next 6 months -a year. The senior bondholders know that the time for finiancial engineering is over as who ever buys it will have to invest in the company.
It will make no difference to the ordinary Joe Soap as it is a case of the senior leanders trying to recover there money which they will find a hard job they will have to take a serious haircut when they sell and all the junio leanders will be wiprd out. Happens all the time to ordinary companies however it will be the bankers that take the hit here.

GSF

Farmer Pudsey wrote: »

The company is highly profitable with a bank balance of 300 million+.

It has declining profitability, low growth prospects from non investment and a largely fixed cost base. Not great prospects when you can invest money in so many better alternatives.

Sleepy

It's militantly unionised, it's infrastructure has been allowed to degrade for years, it's losing market share to providers of more modern broadband and mobile providers and the only things they seem to be marketing at the moment are add on benefits to using their ADSL technology rather than cable broadband. Dead company walking if you ask me.

Kalimah

Sleepy wrote: »

It's militantly unionised, it's infrastructure has been allowed to degrade for years, it's losing market share to providers of more modern broadband and mobile providers and the only things they seem to be marketing at the moment are add on benefits to using their ADSL technology rather than cable broadband. Dead company walking if you ask me.

I have to agree re lack of investment in infrastructure. However the unions sold out to management long ago. It was a good company to work for but it's a basket case now and all down to leveraged buyouts.

Sponge Bob

The lenders are acting as shadow directors now. They control it already but are going through the 'expressions of interest' sale process where STT are nominally selling between now and March. STT pulled out in December.

Last years annual accounts are well overdue and Comreg are not even bothered pushing for regulatory accounts to be filed.

I would think that anybody buying it (for €1 or so inc the Unions stake) and who has any industry credibility will demand a higher haircut from the senior lenders who were supposed to roll over maturity and take a 10% equity cut under the STT 'plan' last year...the juniors and the PIK were to take a 100% haircut mind.

The poxy unions could even end up buying out STT yet.

Spacedog

HA!

I wouldn't p*ss on Eircom if they were on fire. They (telecom Eireann) imposed maximum charges to early adopters of BBSes and the internet in the early 90s. then fleeced the country after floating shares, just as this artificial revenue stream was wiped out by the introduction of broadband, and unlimited dialup internet access in the late 90s.

Dublin 2600's site featured an intercepted call of the managing director talking on his mobile phone about fixing prices for internet and data lines.

They are another symptom of Irelands inherent corrupt culture and I for one are glad to see them finally fall.

Sponge Bob

Spacedog wrote: »

Dublin 2600's site featured an intercepted call of the managing director talking on his mobile phone about fixing prices for internet and data lines.

Was that 2600 or Phrack and is there an archive or an old url for that site or a copy of the audio file. ??

Farmer Pudsey

Sleepy wrote: »

It's militantly unionised, it's infrastructure has been allowed to degrade for years, it's losing market share to providers of more modern broadband and mobile providers and the only things they seem to be marketing at the moment are add on benefits to using their ADSL technology rather than cable broadband. Dead company walking if you ask me.

You or I will not be investing in it as it will a trade sale it still has over 50% of market share and has the only national landline network. It own's Meteor and e-mobile and yes it needs to invest however it like the hungry looking bullock in the Mart it depends at what price you buy it and there will be plenty intrest in it as it will be sold for the rigt money

Sponge Bob

The right money with it carrying over €2bn of debt is €1 on a good day. It is only worth something if the senior lenders take a partial hit as well as wipe out juniors and subbies.

STT told them to take a 10% hit and they seemingly refused....so STT pulled their directors and walked.

Some of the proposed 'ringfenced' network investment cash is being spent . Huawei got the FTTC contract ...whatever about the FTTH one and hired Kn Networks as a subcontractor on the job.

http://www.knnetworkservices.com/news/2012/02/huawei-technologies-contract/

Mervue (Co Galway); Douglas (Co Cork); Dooradoyle (Co Limerick); Tallaght, Ballyboden, Palmerstown (Dublin City); Clonee, (Co Meath); Letterkenny, (Co Donegal); Swords, Donabate, (Co Dublin).

I don't know who is doing the FTTH gear, perhaps Huawei too. More below.

http://www.siliconrepublic.com/comms/item/23309-eircom-reveals-locations-fo

So thats 10 exchanges ...only another 1190 to go and at the rate they are cracking on with it that will only take 100 years.

GSF

eircom is seriously exposed if Sky enter the triple play market in Ireland. Already UPC [as disorganised and disfunctional as it is] is eating into its business.

The £300m of cash would soon be eaten up buying off the lifers who do bugger all but have gold plated contract terms.

Farmer Pudsey

Sponge Bob wrote: »

The right money with it carrying over €2bn of debt is €1 on a good day. It is only worth something if the senior lenders take a partial hit as well as wipe out juniors and subbies.


QUOTE]

Whoever buys it will give the lenders a good hair cut, the juniors and subbies are gone. The reality is that if the senior lenders are looking for a exit as the GE Boss Jack Welsh is supposed to have told Tony Ryan after he complained that he was being raped when he was trying to sell Guinness Peat Aviation ''if you go about with your pants around your ankles what do you expect'' He got it for a song and made another fortune out of it
Eircom is the same bankers are not Telecoms managers they will take a haircut make a deal and whatever company buys it will make money.

Sand

Spacedog wrote: »

HA!

I wouldn't p*ss on Eircom if they were on fire. They (telecom Eireann) imposed maximum charges to early adopters of BBSes and the internet in the early 90s. then fleeced the country after floating shares, just as this artificial revenue stream was wiped out by the introduction of broadband, and unlimited dialup internet access in the late 90s.

Dublin 2600's site featured an intercepted call of the managing director talking on his mobile phone about fixing prices for internet and data lines.

They are another symptom of Irelands inherent corrupt culture and I for one are glad to see them finally fall.

Yeah, Id agree with this. I do everything in my power to minimise any money that might flow to Eircom from my pocket. I remember them back in the 90s ripping us off for awful internet access and loudly announcing that Irish customers didnt want reasonably priced broadband. And theyre doing the same right up to the present day. They can burn for all I care.

The only thing the government should do is look to buy back the infrastructure. Preferably minus the employees - Eircom can keep their world-class unionised workforce.

ted1

GSF wrote: »

eircom is seriously exposed if Sky enter the triple play market in Ireland. Already UPC [as disorganised and disfunctional as it is] is eating into its business.

The £300m of cash would soon be eaten up buying off the lifers who do bugger all but have gold plated contract terms.

If sky were to enter the broad band market, they would have to either buy Eircom, or use their lines and pay rental so it wouldn't have to much of an affect. might actually increase the number of peopel who pay rental on their lines.

gbee

HellFireClub wrote: »

I'd be interested to know what the bad debtors book in Eircom is looking like. Imagine all of the small, ...

Me being one of them, €120 a month for BB & Phone and I bring in €75 in January after two years of ongoing client losses.

Thy want me to pay €40 a week .. bless 'em.

Sponge Bob

eircom are scheduled to release their Regulatory Accounts this week or next week.

they are due to go into Examinership for at least 30 days, starting in about a months time.

http://www.independent.ie/business/irish/eircom-rating-cut-over-selective-default-3029068.html

RATING agency Standard & Poor's said Eircom is in "selective default" after missing an interest payment to bond holders.

The Eircom interest payment has officially only been suspended, but no one inside the company or in the markets expects the €5.77m payment due ever to be paid.

MagicMarker

What's the worst case scenario here?

gordongekko

MagicMarker wrote: »

What's the worst case scenario here?

Eircom survives in its current format

Solair

I think at this stage, it's in the national interest that the telecommunications infrastructure that makes up eircom is sold in a debt-free way, to an actual telecommunications company that wants to run it for profit rather than just speculate on its share price!

Eircom's corporate interest does not equate with the national interest and I would sincerely hope that nobody considers any kind of a bale out for them. They are absolutely not necessary, the infrastructure is though! Remember, at this stage, eircom is basically an indirectly Singapore Government owned entity!

Any telecommunications operator here is subject to a licensing regime. Their license could quite easily be pulled if they fail to meet certain requirements. In that case, it would be auctioned and other providers could purchase the operation as a going concern or the state could perhaps purchase (at a very very discounted price) the local access infrastructure to create a more level play field and correct the grave error that was made by selling off the whole network to one company.

I would also suspect that any state aid to eircom would probably be illegal under EU competition law and it would be HEAVLY challenged by eircom's competitors too.

Sponge Bob

http://www.bloomberg.com/news/2012-03-20/erc-ireland-finance-in-failure-to-pay-credit-event-isda-says.html

Credit-default swaps on Eircom Group Ltd (ERU).’s parent ERC Ireland Finance Ltd. will be settled after the International Swaps & Derivatives Association said there has been a failure-to-pay credit event.
ISDA’s determinations committee ruled an auction will be held “in respect to outstanding CDS transactions,” it said in a statement. There were 2,080 swaps contracts covering a net $293 million of the Dublin-based phone company’s debt as of March 9, according to the Depository Trust & Clearing Corp., which runs a central registry for the market.
ERC Ireland Finance was cut to ‘selective default’ from CC by S&P last month after the company missed a coupon payment on its floating-rate notes. Eircom, seeking to restructure 3.75 billion euros ($5 billion) of debt, may seek protection from creditors as early as this month, three people with knowledge of the matter said Feb. 15.
Eircom said March 14 it supports “in principle” a restructuring proposal submitted by a group of first-lien, or most senior, lenders. They proposed writing off 15 percent of their loans, double the amount previously planned, in exchange for full control of the company, two people with knowledge of the matter said that day.
The first-lien lenders, led by two Blackstone Group LP units, envisage second-lien lenders recovering 35 million euros, or 10 percent, of their loans, with more junior creditors losing virtually all their investment, according to the people.

Next up is the big default on the second lien and the small reduction in first lien debt. Both will trigger Credit Insurance events.

Sadly the latest restructuring proposals will leave eircom with an unfeasible €2.1-2.2bn of carried debt thereby ensuring a further default in around 3 years time.

But expect lots of PR flannel and froth fairly shortly.

Solair

Doesn't sound good!

Head The Wall

Will the ESOT lose their share of Eircom in this, can't say I'd be sorry, they have been complicit in the raping of the company and are why it is where it is today. Short term thinking at its finest.

Sponge Bob

ESOT and STT are gone, they are totally wiped out along with the junior debtholders.

The problem is the senior debt is not being written down to a level that permits debt servicing and investment in order to survive. The senior debt holders now own and control eircom in effect.

Solair

I sincerely hope it's sorted out soon.

I really think that eircom would be better off as part of a larger European telco. It's been unable to develop as a speculators' plaything.

It needs access to technological resources and also long term investment by a company that actually wants to run a phone company, not just make a quick buck!!

If you compare Chorus to UPC you see a similar scenario. It improved by leaps and bounds when it integrated with a big pan European operator!

The last thing eircom needs is protracted ownership by financial services companies !!

Sponge Bob

That is what it faces unless they write the debt ( ie the bonds held by the expected new shareholders) down by another €1bn or so.

At around that point....€1.4bn debt not €2.4bn debt........ it will acquire a positive net value....around €1 or so and they can then sell it off for €1 with a sustainable and fully performing debt.

The current proposal, a partial debt writeoff, ensures it will default again in future. I give it 3 years.

Sponge Bob

Vote tomorrow on the restructuring and the CEO has just announced he is legging it later this year.

http://www.rte.ie/news/2012/0327/eircom.html

helimachoptor

That's not surprising, he'll pop up within a few months of leaving eircom

Sponge Bob

I think the Prepack Bankruptcy (called an Administration in the UK or an Examinership in Ireland) is planned for tomorrow or friday. Not sure which jurisdiction.

Sponge Bob

Breaking News. Here and Today.

http://www.irishtimes.com/newspaper/finance/2012/0329/1224314047013.html

EIRCOM IS expected to petition the High Court today to enter examinership to give effect to a consensual restructuring of its debt load.

Sponge Bob

Sponge Bob wrote: »

Sadly the latest restructuring proposals will leave eircom with an unfeasible €2.1-2.2bn of carried debt thereby ensuring a further default in around 3 years time.

Three ( their parent actually, Hutchison Whampoa) have made a most generous €2bn cash offer for eircom and that is the best offer they will get between now and what inevitably will become Default #2 in around 3 or 4 years time. .

http://www.irishtimes.com/newspaper/finance/2012/0511/1224315905230.html

Some wonder why Hutchison/3 left it so late to table an offer for Eircom. Morgan Stanley ran a sale process just before the examinership was put in train.


This might have something to do with the price (that was) being sought – thought to be €3 billion-plus. Hutchison/3 seems to value Eircom at €2 billion, end of story.


Goldman Sachs has advised the Hong Kong-based company on the bid. It has form with Eircom, having advised Sir Anthony O’Reilly’s Valentia on its takeover of Eircom and helped it to IPO.


Unless Goldman Sachs can pull a rabbit out of a hat in the next couple of days, the bid looks doomed. It will become a mere footnote in the weird and wonderful story of Eircom post privatisation.

We shall see. If Hutchisons bid is rejected then the whole sorry mess will continue.

Sponge Bob

Hot off the press. The €2bn bid was rejected and the scheme to leave eircom carrying €2.3bn of debt is going to a vote next friday.

approval. Roll (slowly) on the next default.

.....unless maybe Hutchison bid €2.1-2.2bn in the meantime. We'll know by monday.

http://www.irishtimes.com/newspaper/breaking/2012/0511/breaking20.html

Mr McAteer last night last night rejected a revised cash offer for Eircom from 3 Ireland and its Hong Kong-parent group Hutchison Whampoa.

Solair

That doesn't sound great to be honest. I can't see many other bidders being that interested in eircom, particularly given the state of the Irish economy and its dependence on the Irish consumer market.

gbee

Solair wrote: »

That doesn't sound great to be honest. .

I'd take the view that the 3 Mobile network has set a reputation for 3 Telco and TBH, I'd prefer to see Eircom getting another bailout of tax payers money.

Now, if Sir Richard Branson expressed an interest, I'd grab it with open arms and think him a saviour.

Sponge Bob

Nobody else will offer €2bn for it . Morgan Stanley hawked it around at €3bn and were laughed at.

Someone else ( O Brien ???) offered €1.7bn for it and I reckon €1.5bn is fair value...unless the social welfare benefits are cut entirely which alone could cost eircom 100k customers overnight.

UPC added 25,000 Telephone Customers in the last quarter alone which is even more impressive when you realise that this Telephone service is only available to 700k homes in large towns and cities.

That is analagous to eircom picking up 75k new telephone connections in a QUARTER considering their much wider reach to the 2m homes and 100k businesses in the state...3x that of UPC at present.

The punters are jumping because of the outrageous line rental charges and no next generation nuthin will get most of them back to eircom.

AlmightyCushion

Sponge Bob wrote: »

Hot off the press. The €2bn bid was rejected and the scheme to leave eircom carrying €2.3bn of debt is going to a vote next friday.

approval. Roll (slowly) on the next default.

.....unless maybe Hutchison bid €2.1-2.2bn in the meantime. We'll know by monday.

http://www.irishtimes.com/newspaper/breaking/2012/0511/breaking20.html

I remember reading somewhere else that Hutchinson Whampoa were going to invest 1.3B in the eircom network. If true that would be brilliant. I am wary of them taking over eircom (3's customer service is woeful at best) but they have the money and seem willing to invest. We really need eircom to start competing and sticking it to UPC.