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Eircom to Clear Bank Debt

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  • 22-07-2002 10:03am
    #1
    crawler
    Registered Users Posts: 1,660 ✭✭✭


    Even more evidence of a sell-off in the near future.

    "The Sunday Times reported that Eircom is planning to issue EUR2 billion in bonds to clear its bank debt. The company is expected to sell up to three types of bond, with terms of up to 25 years, and to use the money to repay bank loans with terms of between five and eight years. The bond deal will also generate around EUR150 million in cash, which will be distributed to Eircom shareholders. "


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    #2
    jmcc
    Registered Users Posts: 7,409 ✭✭✭jmcc


    Sounds like the 'Eircom shareholders' are scared and want to dump Eircom like a hot potato. If these guys want to issue new bonds to cover existing debt that was incurred while taking over the company, wouldn't this reduce Eircom to junk bond status? It is effectively (from my limited engineering viewpoint) trading one debt structure for another. However the investors in Eircom seem to want to bail out now that they have found out how limited the Irish market is due to Eircom's mismanaged monopoly. Another factor is that some of the investors could have and exposure with some of the bigger corporate collapses.

    Either way, it looks like the the Valentia fsckers have become the fsckees, and they are left with an overstaffed, lameduck telco with diminishing prospects.

    Regards...jmcc


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    #3
    jd
    Registered Users Posts: 5,695 ✭✭✭jd


    Originally posted by jmcc
    If these guys want to issue new bonds to cover existing debt that was incurred while taking over the company, wouldn't this reduce Eircom to junk bond status?


    It is effectively (from my limited engineering viewpoint) trading one debt structure for another.
    Not as i understand it. The existing (short term) debt structure is probably closer to (but isnt) junk bond status than the proposed restructuring of the debt. Junk Bonds are characterised by high yields-while the yield on the new bond structure is lower. I'm assuming they are paying off the old loans with the new..
    may come back to it tomorrow-tired and ill


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