Eircom loan plummets on breach covenant fears

Eircom's second lien term loan D continued its sharp recent decline on Friday, falling 4.68% from 58.52 to 55.78 amidst expectations that a covenant breach is imminent from the Irish telecoms firm. The term loan D has declined by over 15% on the secondary market in the past week, falling from 65.98 on 27 May to 55.78 on 3 June, according to data from Markit.

Any covenant breach would have a major negative impact on the European CLO world, with 68.5% of European deals holding Eircom's debt according to CLO-i. Moody's last week downgraded Eircom's parent, ERC Finance, from Caa1 to Caa2, stating it expects Eircom to implement a debt restructuring exercise in the short term, after an anticipated covenant breach in the next quarter.