Key Eircom hearing set for tomorrow

bealtine

http://www.irishtimes.com/newspaper/breaking/2012/0515/breaking46.html#.T7K10UyEVc0.twitter

MARY CAROLAN

An unprecedented application to come before the Commercial Court tomorrow could affect plans by Eircom's examiner to finalise a survival scheme with creditors on Friday for companies employing 5,800 people.

New York-based DW Investment Management LP (representing 52.4 per cent of creditors of Eircom holding €350m Floating Rate Notes) and Hutchison Whampoa (HWP), parent company of mobile phone operator 3 Ireland, have taken proceedings following last week's decision of Eircom examiner Michael McAteer rejecting a revised €2 billion cash offer for Eircom from 3 Ireland and HWP.

Under the proposed scheme of arrangement for Eircom Ltd, Meteor Mobile Communications Ltd and Irish Telecommunications Investments Ltd, the floating rate noteholders will not receive a dividend and will have their debt “extinguished”.

DW Investment Managers claims its clients would do better under the HWP proposals as they would involve a €50m payment for FRNs.

HWP has alleged that "lock-in" restructuring proposals for the Eircom companies agreed between the companies and senior creditors around the time of the examiner's appointment have effectively pre-determined the success of the proposed scheme of arrangement.

Among various directions being sought from the court by the applicants is one retracting a letter sent from Morgan Stanley, on behalf of Mr McAteer, advising HWL the examiner had decided not to proceed with the HWL bid and, as a result, HWL would not be allowed into phase II of the bidding process.

The applicants are also seeking a direction requiring the examiner to postpone meetings of the Eircom companies creditors convened for this Friday.

When the matter was mentioned to Mr Justice Peter Kelly at the Commercial Court today, he told Michael Cush SC, for the applicants, he had never heard of an application like it. Mr Cush agreed it was unprecedented.

The judge agreed to allow the application be served at short notice on the examiner and other affected parties and returned the matter to tomorrow.

The applicants are seeking directions requiring the examiner to engage with them and allow them access to Eircom's management team, information relating to the Eircom companies and other materials.

The proceedings could defer meetings of creditors in Dublin on Friday where the examiner intended to outline scheme of arrangement proposals which would then be put before the Commerical Court for approval.

The scheme was expected to receive the necessary support from creditors as they had already agreed to its terms in principle before the examinership process commenced on March 29th.

bealtine

bealtine wrote: »

An unprecedented application to come before the Commercial Court tomorrow

http://www.siliconrepublic.com/business/item/27276-high-court-refuses-hutchiso

The High Court has dismissed an attempt by Hutchison Whampoa to block the restructure of struggling telco Eircom on the grounds that the Hong Kong conglomerate’s €2bn bid to buy the company was not properly given consideration by the Examiner.

The move ends a bid by one of the world's biggest companies with significant financial resources to buy Eircom which is struggling under a €3.7bn mountain of debt and instead paves the way to give control over to senior debt holders who are owed €2.7bn.

On Tuesday Hutchison Whampoa, which employs 230,000 people worldwide and owns mobile operator Three Ireland, applied to the High Court jointly with DW Investment LP, a junior creditor.

In a ruling today the High Court dismissed the application in favour of the senior debt holders.

Last week Eircom's Examiner Michael McAteer of Grant Thornton declined a second €2bn cash offer by Hutchison Whampoa, the Hong Kong-headquartered conglomerate headed by Li-Ka Shing that employs 230,000 people in 54 countries.

The new offer included a €50m cash offer to creditors who are likely to be wiped out if a deal between Eircom's Examiner and senior lenders goes ahead. The second offer also saw the "conditionalities" removed except for due diligence.

In a statement Three Ireland communications director Rachel Channing said that Hutchison Whampoa is disappointed with the court's decision.

“We sought direction from the court in order that our offer for Eircom was given due consideration," she said.

“Three believes its offer was best for Eircom, its stakeholders and Ireland Inc. Three's parent company, Hutchison Whampoa Limited (HWL), an experienced telecommunications operator, had committed to provide the stability and ongoing investment that is necessary for the Eircom business to recover.

“We are disappointed with today's outcome however we respect the court's decision and it is business as usual at Three, offering Irish consumers great value for money on Ireland's fastest high speed network."
So what's next for Eircom?

By rights Eircom should be the jewel in Ireland's infrastructural crown.

However, when Ireland needs a strong, robust telecoms player as the digital economy kicks into gear we find an incumbent operator that is €3.7bn in debt and about to enter into the hands of its eighth set of owners in 13 years.

You could argue that Eircom's misfortunes began in 1999 when the company went for an IPO. At that time it was debt-free and employed 12,000 people.

Today the company employs 5,000 people, owes a lot of money and is in the midst of a complicated restructure.

The company's management say that following this process it will somehow pump €400m into a plan to connect more than 1m premises in Ireland to fibre broadband infrastructure within three to four years.

To an incredulous public, turning away a buyer with deep pockets to invest in fibre infrastructure and secure employment for its workers seems either foolhardy or suspicious. No one in Ireland has the appetite, time or patience for yet another perceived asset-stripping exercise. The economy needs certainty.

It will be important in the coming days for Eircom and its senior debt holders to communicate very clearly where this €400m will come from and how and when it will happen.

watty

Well Three would say that.

But people in the "Industry" and experts might have a different view.

clohamon

watty wrote: »

Well Three would say that.

But people in the "Industry" and experts might have a different view.

I don't think you can say what 3 would or wouldn't do. They seem to be able to endure any amount of financial pain and still keep coming.

And by the way, it just shows the stupidity of regulators in attempting to regulate tiny markets (like Ireland) by financial incentives or clever-clever auctions when there are huge players in them with agendas that don't follow any normal business logic.

watty

Certainly STT's purchase seemed to fall flat. I guess they assumed they could do a 50%+ "haircut" on the Creditors and it failed.

Of course I can't say what Three would do. But on past experience in every market it's unlikely to match the hype before acquisition/rollout of company/licence/network/upgrade. But this is of course generally true of many companies.

I've never been part of the "Tin hat" & "reds under the bed" camp and HWL isn't as quite as Chinese as Lenovo or Huawei, but there is no doubt that the real agenda of some Chinese tech companies is not the same as say Google, Microsoft, AT&T etc. For instance Huawei Mobile and fibre rollouts in Africa may be more about obtaining control of resources such as Oil, Rice, Meat...