Eircom - another bad investment by Temasek

[SNAblog]

http://www.reuters.com/article/2011/12/23/eircom-stt-idUSL6E7NN11N20111223

STT withdraws from eircom after offer rejected

DUBLIN, Dec 23 (Reuters) - Eircom's owner Singapore Technologies Telemedia has withdrawn from the board of the struggling Irish telecoms firm after lenders rejected its proposal to restructure 3.75 billion euros ($5 billion) of borrowings, eircom said on Friday.

Temasek unit STT bought 65 percent of debt-laden eircom in 2009 for 140 million euros in cash and shares, but would likely have to invest more than that to maintain control of the company after restructuring. An employee share trust owns the other 35 percent.

Lenders last week rejected a restructuring proposal from STT which they said would have forced them to accept a 25 percent impairment in exchange for a 200 million euro cash injection.

STT withdrew its representatives from the boards and committees of eircom and associated companies on Thursday after its offer was officially rejected, the Irish operator said in a statement.

"We are disappointed that the First Lien Coordinating Committee did not engage with us at all on this second proposal," said Terry Clontz, STT's Senior Executive vice president for North America and Europe.

"We extend our sincere best wishes to the company, the management and employees of eircom in their ongoing efforts in building a sustainable and successful eircom."

Eircom's independent directors are evaluating two other proposals to restructure the debt, including one from the syndicate of first-lien senior lenders, the most senior in any restructuring, owed 2.4 billion euros, and another from a group of second-lien senior lenders owed around 350 million.

The company agreed with lenders to extend the waiver of the breach of its senior debt to EBITDA (earnings, before interest, taxation, depreciation and amortisation) covenant until January 31.

Moody's rating agency on Thursday downgraded eircom's debt to highly speculative and said its loss given default -- how much of its loan would be written off if they go bad -- was around 35 percent if a consensual restructuring is achieved.

 

[SNAblog]

http://www.irishtimes.com/newspaper/breaking/2011/1223/breaking14.html

STT withdraws Eircom proposal

Eircom’s Singapore-based shareholder ST Telemedia has withdrawn its debt restructuring proposal and resigned its representatives from the various boards and committees of the group’s companies.

This move follows the decision last week by first-lien lenders to the company, who are owed about €2.6 billion, to reject STT’s latest proposal to restructure Eircom’s €3.7 billion net debt.

The board of Eircom said it would now proceed with “detailed discussions” with the first-lien co-ordinating committee (FLC) regarding its proposal to restructure the company’s balance sheet.

Eircom chairman Ned Sullivan said there now existed an “environment of certainty for all the parties to move forward with the restructuring process”.

In a statement issued this morning, STT’s senior executive vice president for North America and EuropeTerry Clontz said the company was “disappointed” that the lenders “did not engage” on its second proposal to restructure Eircom’s debts.

“STT put forward its first proposal to the FLC [first-lien co-ordinating committee] in early August 2011. Until November 2011, STT tried to actively engage the FLC for a speedy conclusion to the shareholder proposal.

“Within this period, despite an increasingly worsening macro-economic situation in the euro zone, STT improved upon its August 2011 proposal in an effort to conclude a debt restructuring package with the FLC in an expedited manner.

“A failure to reach any conclusion with the FLC on STT’s improved proposal, and an acceleration in the deteriorating macro-economic euro zone fundamentals, led to STT to withdraw its first proposal.”

On December 12th, STT submitted a revised proposal that included an equity injection of €200 million, paid in two equal instalments over a one-year period.

However, STT inserted a clause that would have seen them repaid the initial €100 million if Ireland had left the euro zone within a year of the payment being made.

STT also proposed to take a 75 per cent shareholder, offering the lenders 25 per cent. In addition, the lenders would have taken a haircut on their debts.

STT’s revised offer was quickly rejected by the lenders.

Mr Clontz said the revised proposal “aimed to give Eircom the best opportunity to be competitive and viable over the long term as well as maintaining some financial flexibility in the current challenging environment”.

He said STT was “disappointed” that the lenders did not engage with it on its second offer.

Mr Clontz said STT was “greatly appreciative” of the efforts of the directors, management, unions and employees of Eircom as well as its co-shareholders, the employee Esot, in “constructively working together” over the past two years.

STT’s three representatives on the main board of Eircom have resigned their positions. These are Tan Guong Ching, Lee Theng Kiat, and Mr Clontz.

STT currently holds a 65 per cent stake in Eircom with the Esot owning 35 per cent. They took control of the business in January 2010 from former owners, Babcock & Brown.

 

[LumparChee]

Shareholders of companies all over the world now know that Temasek offers them a downside protection - very much like the Greenspan put option.

When Temasek buys into companies, the shareholders gladly sell to them and buy back later at lower prices.

Talking about the 'suckers de la suckers' of the world.

Shall I give Temasek a lesson on how to take over companies on stealth mode ? How about me teaching Temasek how to send a mole into potential companies just to see if their books are cooked before deciding whether to buy ?

I am never more ashamed to be a Singaporean.