A spokesman for the Dublin-based company declined to comment on the waiver, which required approval from two-thirds of senior lenders.

Eircom, saddled with 3.75 billion euros ($5.1 billion) of debt, is struggling to meet loan conditions as austerity measures weigh on its earnings. The covenant waiver may be a temporary fix, said Steven Mitra, a partner at LNG Capital LLP.

“In a debt restructuring situation, getting a waiver is by no means an indication the company is close to being out of the crisis,” said London-based Mitra, who doesn’t hold the company’s debt. “If covenants are getting busted and valuations don’t stack up, shareholders will need to either recapitalize or inject more equity.”

Eircom began talks with lenders led in May for a three- month waiver on covenants after saying a breach was likely. Irish borrowers are suffering from the stigma of the government’s 85 billion-euro bailout last year to rescue the nation’s ailing lenders.

Eircom’s capital structure is “unsustainable” as a weak Irish economy drains its earnings, Moody’s Investors Service said in June when it downgraded the ratings on its parent to Caa2 from Caa1 citing a possible default. The company cut its annual earnings forecast to about 550 million euros from more than 600 million euros, two people familiar with the borrower said in June.

The senior lenders are represented by Alcentra Group Ltd., Avoca Capital Holdings, Deutsche Bank AG, GSO Capital Partners LP, Harbourmaster Capital Management Ltd. and Sumitomo Mitsui Financial Group Inc., Eircom said July 7. They are being advised by Houlihan Lokey.