Valentia, eircom execute supplemental indentures; will pay consent fees with IPO proceeds

New York, March 24 - Valentia Telecommunications (Ba3/BB+) and eircom Funding said they had executed supplemental indentures incorporating recently approved amendments to the indentures governing Valentia's €550 million 7¼% senior notes due 2013, eircom's €285 million 8¼% senior subordinated notes due 2013 and eircom's $250 million 8¼% senior subordinated notes due 2013.

Valentia and eircom additionally announced that eircom Group plc had completed an initial public offering of its ordinary shares, raising €300 million in gross proceeds for eircom Group.

As a result, Valentia and eircom Funding will now pay within five business days the consent fees to holders notes who consented to the amendments for which the consents had been sought under the consent solicitation that began Jan. 22, which was amended on Feb. 13 and which concluded as scheduled on Feb. 20.

Under the terms of the amendments approved by the noteholders, the covenants relating to restricted payments in each of the indentures have been amended to allow Valentia to pay a dividend or make other payments to eircom Group plc, assuming certain other conditions are met, if Valentia receives at least 85% of the net proceeds from the just completed IPO.

Also modified are the tests set out in the indentures relating to calculation of the amount of a restricted payment that may be made.

The exception to the restricted payments covenant set out in the indentures prior to amendment - which permitted restricted payments of up to a total of €75 million - has been amended.

And Valentia and eriecom will not be permitted to redeem up to 35% of the original principal amount of Valentia's 7¼% notes and eircom's 8¼% dollar- and euro-denominated notes with the net cash proceeds of the IPO, as they would otherwise be permitted to do under the terms of the notes' respective indentures.

As previously announced, Valentia, an Irish telecommunications company, and eircom said on Jan. 22 that they had begun soliciting the noteholder consents. The solicitation was originally supposed to expire at 5 p.m. ET on Feb. 4 but was subsequently extended, ultimately to Feb. 20.

Valentia and eircom initially said that they would make consent payments of €2.50 for each €1,000 principal amount of senior notes, $3.75 for each $1,000 principal amount of dollar-denominated senior subordinated notes and €3.75 for each €1,000 principal amount of euro-denominated senior subordinated notes.

On Feb. 13, the companies said that after discussions with certain noteholders, they had revised the proposed amendments.

In addition, the companies increased the proposed consent payments to €20 for each €1,000 principal amount of euro-denominated senior notes, $20 for each $1,000 principal amount of dollar-denominated senior subordinated notes and €20 for each €1,000 principal amount of euro-denominated senior subordinated notes, up from the originally announced €2.50, $3.75 and €3.75, respectively.

Valentia and eriecom announced on Feb. 23 that they had received the necessary consents from the holders of each series of notes by the extended Feb. 20 expiration deadline.

In announcing the consent solicitation, the companies said that the proposed indenture amendments they sought would give Valentia greater flexibility to pay dividends in the event of an initial public offering of its equity securities or to pay dividends or make other payments to its parent, Valentia Holdings Ltd., or another direct or indirect parent company of Valentia in order to fund the payment of dividends to the holders of the parent company's ordinary shares, preference shares or other capital stock in the event of an initial public offering of equity securities of Holdings or any other parent company.

They said the amendments would be subject to consents from holders of a majority of the outstanding principal amount of the senior notes and the senior subordinated notes and completion by Valentia or any of its parent companies of its initial public offering of equity securities resulting in gross proceeds of at least €300 million. If such an IPO were not to be completed, Valentia said, no consent fees would be paid. They said that consent fees would be paid within five business days after completion of a qualifying IPO.

Goldman Sachs International (call +44 (0) 20 7774 9054, attention Credit Capital Markets or 800 828-3182, attention Credit Liability Management) and Citigroup (attention Liability Management Group at +44 (0) 20 7986 8969 or collect at 212 723-6106 or 800 558-3745) were the solicitation agents. The tabulation agent was The Bank of New York (call 212 815- 5788).

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