The High Court granted court protection to Eircom Limited and related companies Meteor Mobile Communications Limited and Irish Telecommunications Investments Limited, appointed an interim examiner and directed that their petition for an examiner proceed to a hearing on 18 April 2012.
In a judgment delivered on 30 March 2012, Mr Justice Kelly said the companies were insolvent. The group owed €4.08 billion to financial creditors, had breached financing covenants and could not meet demanded repayments on its first and second lien debt. The judge said Eircom’s assets exceeded its liabilities before contingent liabilities were taken into account, but the evidence showed its cash flow was insufficient to meet debt repayments.
The petitioners sought protection under the Companies (Amendment) Act 1990. The court had to be satisfied there was a reasonable prospect that the companies, or all or part of their undertaking, could survive as a going concern. An independent accountants’ report supported that prospect, subject to conditions including restructuring borrowings and guarantees, creditor and court approval of a scheme, and successful delivery of the company’s business plan. The judge accepted that evidence and found examinership would offer creditors a better outcome than receivership or winding up. He noted the evidence indicated about 1,000 employees were likely to lose their jobs over five years under examinership.
The judgment described proposed debt restructuring that had been voted on by some creditor classes: a €407 million reduction in first lien debt, a 90 per cent reduction in second lien debt and the elimination of the floating rate note liability. The judge said the advanced negotiations and prior creditor votes meant an interim examiner could accelerate the process. He appointed Michael McAteer of Grant Thornton pending the petition hearing.
The court also permitted identified pre-petition liabilities to be paid during examinership. The judge accepted the accountants’ view that paying those liabilities was important to maintaining supplier support, employee cooperation and uninterrupted customer services. The order did not decide the petition for a full examinership; that hearing was fixed for 18 April 2012 at 11am. ComReg was added as a notice party.