STT Said to Seek Eircom Debt Clause in Event of Irish Euro Exit

Eircom Group Ltd. owner Singapore Technologies Telemedia Pte. is seeking to safeguard any new investment in Ireland’s biggest phone company in case the nation exits the euro, according to a person familiar with the matter.

STT proposed yesterday that any additional equity it puts into Eircom convert into debt outranking other creditors should Ireland drop the euro, said the person, who declined to be identified because the talks are private. STT sought to “derisk” its investment, Joe Carmody, an external STT spokesman said, as Eircom seeks a 3.8 billion euros ($5 billion) debt restructuring.

“The new proposal, while reflecting the current macro-economic uncertainty in the euro-zone, is targeted at giving Eircom the best chance to be competitive and viable,” he said in an e-mailed response to questions.

STT said on Dec. 2 that it wasn’t ready to make a debt-restructuring proposal “owing to the continuing macro-economic uncertainty in the euro zone.” Trades at Intrade, the Dublin-based firm whose clients try to predict events, indicate a 50 percent chance that a country will leave the euro by the end of 2013.

Eircom is saddled with borrowings following five ownership changes in the past 12 years. The company said yesterday it is weighing STT’s proposal, alongside one from its first-lien lenders and another from its second-lien creditors.

STT proposed that a material adverse change clause be inserted into any agreement, which would involve any further cash it injected into Eircom converting into a so-called super senior debt in the event Ireland exits the euro, the person said. A super senior lender is usually a bondholder who’s repaid before any other in a default.


In a statement yesterday, STT said “it is difficult to comprehensively assess the impact on Eircom of any possible changes that may occur within the euro-zone.”

The euro yesterday fell to the lowest level in two months versus the dollar as Moody’s Investors Service said it will review the ratings of European Union nations after last week’s summit failed to produce decisive steps to end the debt crisis.

STT wants first-lien lenders to write off more debt than was proposed in August, according to the person familiar with the situation.

STT’s originally proposed the company’s most senior creditors write down 8 percent of what they are owed in exchange for a stake between 15 and 25 percent in the company, according to three other people.

Carmody declined to comment in detail on STT’s proposal. STT took control of Eircom in 2010 following an initial investment of between 30 million euros and 40 million euros.

Eircom spokesman Paul Bradley and a spokesman for the company’s first-lien lenders each declined to comment.

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