Eircom bosses looking to cut again to make way for new investment

8 Feb 2011

The Irish Independent reports that a blueprint for a further round of cost cutting at former monopoly Eircom could be unveiled within the next fortnight, paving the way for the firm to tackle its sizeable debt burden. It is understood that the proposals have yet to be approved but will go before union members within weeks for a view to securing their agreement. It is hoped that members’ acceptance of additional cost rationalisation would clear the path for majority-owner Singapore Technologies Telemedia (STT) and Eircom’s Employee Share Ownership Trust (ESOT) to invest as much as EUR300 million (USD407 million) in fresh equity in the struggling business. The paper quotes people familiar with the situation as saying that the cash injection is dependant on Eircom securing agreement with senior lenders, owed EUR3 billion and senior bondholders owed EUR350 million, over how the money would be used. Shareholders are seeking assurances that any new funds would not simply be absorbed in old debt, due to breaches of covenant or left ‘sitting behind an unsustainable debt pile’. The discussions are expected to take months to resolve, but need to be finalised before a covenant test on 30 June.

Ireland, eir