Irish national telco gets 100 days to escape €4bn debt hell
Eircom made a few corporates very rich, says judge
By Anna Leach • In Financial News • At 14:01 GMT 19th April 2012
The Irish courts have stepped in to protect the country's largest telco from creditors after the firm careered €4bn into debt. A judge yesterday granted Eircom 100 days' grace to restructure its balance-sheet busting debts. This is the biggest such move in Irish corporate history.
Eircom, the country's biggest broadband, landline and 3G network provider, has been put under the control of an external accountant in an attempt to stop it from collapsing. The restructuring plan on the table will ask the company's 200 biggest creditors to accept stock in return for the debt they are owed.
Previous estimates suggested that 1,000 of the company's 5,000 jobs are under threat.
Eircom group CEO Paul Donovan told customers, staff and suppliers yesterday that it was "business as usual". He said the restructuring was a "necessary and unavoidable step on our journey to addressing the unsustainable level of debt on our balance sheet and continuing our operational transformation into a vibrant and competitive company."
Eircom has €4.1bn (£3.4bn) of gross debt but more than €300m (£246m) of cash on its balance sheet, giving net debt of around €3.75bn (£3.06bn).
Formerly state-owned, the telco was privatised in 1999 and has changed hands five times since its initial sale. Eircom's debts ballooned from €500m (£409m) in 1999 to €4.1bn (£3.4bn) today. Presiding over the break-up of the biz in February, Mr Justice Kelly described the past 12 years at Eircom as "corporate pass-the-parcel" in which some players had "won handsomely".
Justice Kelly said Eircom was "of great strategic importance for the State" and a "key provider of fixed-line services throughout the country", according to the Irish Times.
Its current condition, Kelly said, made "sad reading for the State and its citizens". ®