LONDON Feb 7 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
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.