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Hutchison Whampoa Fails in Challenge to Eircom Bid Block

Hutchison Whampoa Ltd., controlled by Hong Kong billionaire Li Ka-shing, failed in a legal challenge to a decision by Eircom Group’s examiner to reject a 2 billion-euro ($2.5 billion) bid for Ireland’s largest phone company.

Judge Peter Kelly, who heard the Hutchison challenge in the High Court in Dublin yesterday, said the examiner was running the process in a reasonable manner and that he had identified “numerous” shortcomings in the company’s bid.

“We are disappointed, however we respect the court’s decision,” Rachel Channing, a spokeswoman for Hutchison unit Three Ireland, said in an e-mailed statement yesterday. “Three believes its offer was best for Eircom, its stakeholders and Ireland Inc.’

Three Ireland and New York-based DW Investment Management LP, which represents some Eircom floating-rate note investors, started a challenge on May 15 against examiner Michael McAteer’s decision to proceed with a survival plan for the company based on proposals from its first-lien, or most senior lenders. The examiner is overseeing a court-supervised debt restructuring at Dublin-based Eircom.

Eircom filed for examinership, an Irish version of bankruptcy protection, on March 30 to restructure the 3.8 billion euros of net debt accumulated in five ownership changes over 13 years.

Hutchison’s bid for Eircom was rejected partly because it would have doubled the losses suffered by the phone company’s most-senior lenders, McAteer said in an affidavit filed with the court this week and obtained by Bloomberg News.

Smaller Recovery

The first-lien lenders to Eircom would have recovered 70 percent of their debts under Hutchison’s indicative bid, compared with their own plan for 85 percent recovery and full equity control of the company, he said.

An initial Hutchison bid on April 27 had conditions that included the need for approval by 50 percent of first-lien creditors, ‘‘which was not forthcoming,” the examiner said in the affidavit.

While a second offer on May 7 dropped this condition, the bid was still subject to due diligence and antitrust clearance, which was “questionable,” he said in the affidavit.

Meanwhile, Judge Kelly said meetings of Eircom’s creditors may proceed, because the examiner is seeking to complete the restructuring by month-end.

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