UPDATE 1-STT eircom offer has euro break-up clause-source

Tue Dec 13, 2011 3:23pm GMT

* eircom owner STT offers to invest 200 million euros for 25 pct haircut

* STT wants clause to protect investment if Ireland leaves euro

* eircom says consumer products under revenue pressure (Adds details of STT proposal, background)

By Conor Humphries

DUBLIN, Dec 13 (Reuters) - The owner of struggling Irish telecoms group eircom has asked its most senior lenders to accept a 25 percent haircut on their debt and wants a guarantee any money it invests is protected if Ireland leaves the euro, a source told Reuters on Tuesday.

Singapore Technologies Telemedia (STT) submitted a proposal to eircom independent directors and senior lenders on Monday to restructure the operator's 3.75 billion euros debt pile in a bid to keep hold of the company.

Eircom's independent directors are evaluating three proposals to restructure the debt, including one from a syndicate of first-lien senior lenders, the most senior in any restructuring, owed 2.4 billion euros, and another from a group of second-lien senior lenders owed around 350 million.

The terms of STT's offer are significantly worse than a proposal made earlier this year, a syndicate source said.

The latest proposal would require senior lenders to accept a 25 percent impairment of their debt, up from 8 percent in the earlier proposal.

STT would invest 200 million euros into the firm, down from 300 million in the earlier proposals. Half would be paid up front and the second half a year later.

It also includes a material adverse change clause, which would make STT's new investment senior to all other debt if Ireland leaves the euro zone, the source said.

The Irish government has repeatedly said it will not abandon the euro, but analysts have warned some weaker countries could be forced to leave if Europe's debt crisis deteriorates.

Lenders in September agreed to waive eircom's debt covenants, to avert a possible default. Eircom said in a statement on Tuesday it would update the market on its request for a new covenant waiver from senior lenders on Dec. 15.

First lien lenders have offered to take a hit of around 8 percent on their debt and extend its maturity in return for full ownership of Ireland's largest telecoms group.

The company confirmed on Tuesday that earnings for the financial year 2011 would be significantly below the previous period due to the battered state of the domestic economy.

It said lower consumer confidence and competition was putting pressure on its fixed line and mobile revenues in its retail, consumer and small business units.

"There are some early signals that consumer confidence continues to weaken performance and may result in some emerging trends that could impact the existing budget," the group said in a statement. (Editing by Carmel Crimmins and David Cowell)

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