Eircom in talks ahead of likely covenant breach

Reuters News
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Posted: May 27, 2011 2:48 AM
Eircom in talks ahead of likely covenant breach

DUBLIN (Reuters) - Struggling Irish telecoms group Eircom said on Friday it is still in talks with its shareholders and intends to hold discussions with lenders ahead of a likely breach in its financial covenants within the next three months.

Eircom, majority-owned by Temasek unit Singapore Technologies Telemedia (STT), in March warned of a significant risk of a covenant breach within three to six months and said it would talk to shareholders about possibly injecting new equity.

Staff at the group have since backed a 92 million euro ($131.3 million) cost-cutting plan, including a 10 percent pay cut, in exchange for an agreement that Eircom and STT would invest in the firm.

Eircom's net debt was 3.75 billion euros in December, or 5.6 times earnings before interest, tax, depreciation and amortization (EBITDA).

Eircom said on Friday its revenue for the three months to end-March fell 11 percent to 407 million euros even after a 13 percent reduction in operational costs because of continued pressures on both the fixed and mobile parts of its business.

"Despite sustained progress to reduce operational costs, the underlying fundamentals of the Irish economy and intense competition continue to create trading challenges for the group across both our fixed and mobile segments," Chief Executive Paul Donovan said.

"Our recent union collective agreement is another important step toward securing the future of the group. Despite these steps, the group is likely to see an accelerating decline in EBITDA in the coming 12 months."

(Reporting by Padraic Halpin; Editing by David Holmes)