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Lawyers involved in one of Europe’s largest restructurings, that of Irish telecoms company Eircom, are gearing up for the next stage of the matter after the owner yesterday offered to inject €200m of new capital into the ailing business.
In particular the legal team acting for the senior debt holders are preparing for their clients to potentially take control of the business after the controversial new offer.
Yesterday’s offer from Singapore-based Singapore Technologies Telemedia (STT) is effectively conditional on Ireland remaining in the euro.
It is understood that the new offer contains a material adverse change (MAC) clause that would see STT hang on to its new cash if Ireland is forced out of the euro.
Sources say the move has the potential to significantly change the dynamics of the restructuring, with senior lenders better positioned to take control of Eircom should STT’s latest bid fail.
As one lawyer close to the restructuring put it: “If the revised proposal from the current owner, STT, is rejected by first lien lenders, then the likely outcome is the first lien lenders will take control through their own plan putting the first lien co-com and their advisers in the spotlight.”
Any debt-for-equity swap triggered by the failure of STT’s offer is likely to be made in late January or early February next year.
Eircom warned in March this year of a risk of covenant breach.
Its net debtwas €3.75bn (£2.67bn) at the end of the last calendar year, and around €2.6bn of that debt is taken up by senior lenders (25 July 2011).
Irish heavyweight A&L Goodbody is advising the senior lenders along with Kirkland & Ellis.
Arthur Cox is advising the company alongside Linklaters, while Freshfields Bruckhaus Beringer is advising STT.