Struggling Irish telecoms group Eircom said on Friday it must accelerate talks on restructuring its debt with shareholders and 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.
Eircom's net debt was 3.75 billion euros in December, or 5.6 times earnings before interest, tax, depreciation and amortization (EBITDA).
It is imperative that we accelerate the discussions with our lenders and shareholders about how we manage a potential breach, Chief Executive Paul Donovan told national broadcaster RTE.
We will need to put the company on a sustainable footing with regard to a future financial structure and that includes the amount of debt that we have on our balance sheet and the terms of that debt.
Eircom said 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.
A 92 million euro ($131.3 million) cost-cutting plan agreed earlier this year that includes a 10 percent reduction in pay and working hours will be implemented next week.
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, 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 and Jon Loades-Carter)