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Lenders take control of Eircom

by Jonathan Braude | Published June 12, 2012 at 10:01 AM

A group of lenders led by Blackstone Group LP formally took control of bankrupt Irish telecommunications group Eircom Ltd., Monday, June 11, after the company emerged from the largest bankruptcy in the nation's history.

After weeks in "examinership," the Irish equivalent of Chapter 11 bankruptcy protection, Eircom gets a new holding company, Eircom Holdings (Ireland) Ltd., a 40% cut in its €4.1 billion ($5.13 billion) debt burden and a new ownership structure.

The Eircom Employee Share Ownership Trust and former majority owner Singapore Technologies Telemedia Technologies Pte. Ltd., are no longer shareholders under the new group structure.

Eircom said the successful examinership process had provided the basis for a more sustainable capital structure, with €1.7 billion of debt removed from the balance sheet. "This allows the company to progress with the execution of the five year business plan supported by the board and its lenders," the company said in a statement.

The formal exit from examinership by Eircom Ltd. and group sister companies Meteor Mobile Communications Ltd. and Irish Telecommunications Investments Ltd. follows a May 22 decision by the Irish courts that approved the cut in debt to €2.3 billion. The presiding judge, Justice Peter Kelly, stated at the time that the scheme, advocated by examiner Michael McAteer of accounting firm Grant Thornton, was endorsed by most of its creditors.

A spokeswoman for Blackstone said the New York firm was "not commenting on anything to do with Eircom at this stage."

However, Eircom has previously said that the future structure would be based on a proposal "put forward by the First Lien Committee of lenders and supported by the Second Lien."

Although the details may have subsequently changed, reports early in the process said the top-level lenders had proposed to acquire the companies in exchange for forgiving 15% of the €2.4 billion debt owed to them, while a second tier of creditors agreed to wipe out 90% of the €350 million they were owed. Holders of unsecured bonds worth €1 billion would likely go empty-handed.

Unsecured trade creditors will be unaffected by the scheme of arrangement and will continue to be paid in full for work completed in accordance with the terms of their contracts.

Eircom Group said on Monday that a new board of directors was now in place, led by an existing troika of independent non-executive chairman Ned Sullivan, independent non-executive director Nicky Hartery and group CEO Paul Donovan as an executive director. Other directors had yet to be announced.

STT made its ill-fated investment in the company in 2010, acquiring Eircom's 57% shareholder, Babcock & Brown Capital Management Ltd., following the collapse of its former parent, the infrastructure group Babcock & Brown Ltd. STT's cash and shares deal valued Eircom's Sydney listed holding company at A$224.2 million, (then worth $204 million). STT is a unit of Singapore sovereign wealth fund Temasek Holdings Pte. Ltd.

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Tags: bankruptcy | Blackstone Group LP | Eircom | telecom

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