RLPC-Eircom extends loan maturities before possible sale or listing

LONDON Fri Feb 7, 2014 9:18am EST

LONDON Feb 7 (Reuters) - Eircom wants its lenders to extend the maturity and alter conditions on about 2 billion euros ($2.7 billion) of leveraged loans, it said on Friday, so that its finances are in better shape for a future sale, flotation or bond market refinancing.

BNP Paribas and Goldman Sachs are joint negotiating with Eircom's lenders over extending loans by two years to September 2019. Interest margins on the loans will increase to 425 basis points (bps) over Euribor from 400 bps.

The Irish telecoms group also wants portability on its loans to allow the debt to remain in place in the event of a sale, rather than the usual change of control and immediate repayment.

Portability is subject to a minimum equity contribution of 20 percent from a lender or a private equity fund with at least $1 billion of assets under management among other conditions.

Eircom also wants approval from lenders to pay dividends after a possible flotation.

The company could look to float in the next 12 to 24 months, a banking source said.

"We believe that improving the group's debt maturity profile is the next step in securing a sustainable and flexible long term capital structure for Eircom, at a cost that is attractive to the group," CFO Richard Moat said.

Lenders have until Feb. 28 to give consent on the requests.

Lenders wiped out more than 1 billion euros of the company's 3.75 billion debt in 2012 in exchange for Eircom's equity - owned by Singapore Technologies Telemedia and the Employee Share Ownership Trust, according to Thomson Reuters LPC (TRLPC).

As part of that restructuring Eircom decided that its debt and equity should be jointly traded until June 2014 but it is now proposing to separate them sooner as part of the changes now being negotiated.

Eircom's combined loans and equity are trading on Europe's secondary loan market at about 125 basis points over par, TRLPC data shows. If the loans and equity are split, the loans are likely to trade in the mid-90's, banking sources said.

"The loans are trading at 125, so you have a group of people that want to buy the equity and a group of people who don't want to buy the equity and are just looking at the credit, and [by splitting them] this should allow both to trade more efficiently," one of the sources said.

The company's results on Friday showed revenue for the quarter and six months ended Dec. 31 was 334 million euros and 657 million, down 5 percent and 7 percent respectively on the corresponding prior year periods.

"While revenue decreased by 5 percent compared to the prior year quarter, this reflects a slowdown in the rate of revenue decline and on a quarter on quarter basis revenue has increased by 3 percent," Moat said.

The company has undergone a number of cost saving initiatives. Eircom has cut 1,679 jobs over the past twelve months and 260 more will leave by the end of this year.

"In addition to delivering cost savings, these exits ensure we have a flexible, fit for purpose organisation. We remain on track to achieve 100 million euros in operational cost savings on an annualised basis by the fourth quarter of this financial year," Moat said.

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