Ireland’s Eircom fails to pay bond coupon within grace period; CDS to trigger

Eircom has announced that it has not made the FRN coupon payment scheduled for Feb. 15 within the 30-day grace period, which constitutes an event of default under the FRNs, as well as under the PIK notes. Today’s statement follows Eircom’s announcement that it is supportive in principle of the revised proposal submitted by the senior co-com earlier this week. Major senior lender GSO dropped its restructuring proposal, with sources saying that it ultimately lacked company support.

Meanwhile, the reference entity for the outstanding CDS contracts is ERC Ireland Finance, the issuer of the FRNs. Sources note that this should trigger a failure-to-pay credit event for the CDS shortly. According to the DTCC, there are 2,080 contracts outstanding, for a net notional amount of $292.7 million.

In Europe the CDS product is a reference entity product, meaning that the CDS contract is written in reference to the entity that issued the bond, rather than in reference to the bond itself. In the U.S., CDS is a reference obligation product, whereby contracts are written solely in reference to a specific bond.

Eircom is the principal provider of fixed-line telecommunications services in Ireland, with roughly 2.6 million fixed-line telephone access channels in service. – Sohko Fujimoto



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