Ratings agency Standard & Poor's (S&P) has downgraded telecoms group Eircom's parent company three notches to CC and warned that the group was in risk of defaulting on its debts.
Eircom, majority-owned by Singapore Technologies Telemedia (STT), has been in talks with its owners about restructuring its €3.75 billion debt pile for months.
The group has set a November 18 deadline for investment proposals, a source told the Reuters news agency last week. Denis O'Brien's Digicel group is also reported to have expressed an interest in the group.
"In our view, there is a clear risk of a capital restructuring over the next few months - which would be tantamount to a default under our criteria - as possible remedies could aim to address the long-term sustainability of the capital structure," S&P said in a statement.
"In addition, we believe that the Eircom group's capital structure may not be sustainable over the long term," it added.
Eircom is battling to survive stiff competition and weak demand in a depressed domestic market.
The group obtained a temporary waiver until December 15 on a leverage covenant and S&P said it was likely to breach the covenant again in December.
Eircom faces a test each quarter to show its ratio of earnings to debt does not fall below a particular level.
