The High Court in London has ruled that Hellas Telecommunications (Luxembourg) II SCA, a Luxembourg finance company forming part of the Hellas Group, should not be dissolved following the end of its administration but that a liquidator should be appointed to investigate the affairs of the Company prior to its administration.
Jones Day act for an informal committee of subordinated note holders (the Committee) of the Company.
The Company was placed into administration on 26 November 2009 following a high profile COMI shift from Luxembourg to England. Immediately following the appointment of Administrators, the Company’s shares in its subsidiary company, WIND Hellas Telecommunications SA, were sold to Weather Finance III S.à.r.l (Weather III), an acquisition vehicle connected to the Company, pursuant to a ‘pre-packed administration’.
At the time of its administration, the unsecured subordinated note holders were owed EUR1.24 billion by the Company.
The Administrators were of the view that the purpose of administration had been achieved and accordingly the Company should be dissolved. The Committee objected to the dissolution of the Company and therefore an application was issued in the High Court for directions with regards to the future of the Company.
The Committee argued that the Company should be placed into compulsory liquidation with new office holders appointed so as to enable a liquidator to investigate the affairs of the Company prior to its administration and in particular, to explore the possibility of potential claims against former management, investors and advisers to the Company. However, the Administrators were satisfied, having completed their investigations, that there were no further matters to be investigated.
In circumstances where the majority of creditors were of the view that a company should be placed into liquidation so as to enable further investigations to continue, Mr Justice Sales commented that, in cases such as this where "huge losses are suffered by a company in such a short period of time as in this case, the court is bound to be sympathetic to the plea of unsecured creditors who ask for its affairs to be examined very thoroughly, including in a liquidation if they are dissatisfied with the examination of the administration…".
Given the above, Mr Justice Sales found in favour of the Committee holding that there were no exceptional circumstances sufficient to displace the basic and accepted rule that where a creditor’s debt is undisputed and dissatisfied, it can expect the court to exercise its jurisdiction in favour of making a winding-up order. Accordingly, it is clear from the judgment that in circumstances where creditors are of the view that a company should move from administration into liquidation so as to enable further investigations to continue, the Courts will be reluctant to refuse such a request, notwithstanding the reasonable, but contrary, opinion expressed by the incumbent insolvency office holder.
A claim brought against the Company by Weather III and its successor in title Crystal Almond S.à.r.l was heard immediately following the Administrators’ application with regard to the future of the Company. It concerned a trust fund (the "Fund"), provided at the time of the administration sale to fund the Company’s investigations for the benefit of its unsecured creditors.
The issues to be determined by the court, included amongst other things, whether the Fund was, on its construction, available to both an administrator and a liquidator of the Company. The drafting of the sale agreement (which set out the terms upon which the Fund was to be made available), suggested, so Weather III argued, that such monies were available to the named administrators only. However, the Court held that the commercial objective in establishing the Fund was to provide funds so as to enable the Company’s affairs to be investigated and if appropriate, to bring claims and collect assets for the benefit of the Company’s unsecured creditors. Accordingly, the natural intention and objective of the parties must have been that such monies would be available to a liquidator, as well as an administrator.
Accordingly, Mr Justice Sales dismissed the claim issued by Weather III to recover the balance of funds which it claimed were due to it and held that such monies ought to be retained by the Company and available to a liquidator of the Company.
In view of the above, the Company was placed into compulsory liquidation earlier today and the Fund will be available to the liquidator to investigate this matter further.
The Jones Day team, led by Michael Brown and Michael Pabst included Lisa Allenden and Laura Dobson, with specialist insolvency advice being provided by Kay Morley.
