Troubled travel group MyTravel secured a court victory over bondholders in November when a High Court judge ruled that the firm does not need consent from bondholders to carry out its debt restructuring plan.
Bondholders had rejected MyTravel’s offer of an £800 million debt-for-equity swap that would have left them with just 8% of the company – effectively a 70% haircut on their £216 million investment.
MyTravel needed the support of 75% of bondholders. By the November 17 deadline, the travel company had received support of just 0.23%. MyTravel will now pursue a court-directed scheme of arrangement that could cut bondholders’ share from 8% to just 2%. Shareholders and bank lenders will meet with MyTravel management on December 13 to formalise plans – and bondholders will not be invited.
A source close to the bondholders’ committee told Credit: “This could have repercussions for the whole convertible bond market. They are treating us as though a bankruptcy has already happened when in fact the firm is still a going concern.”
An ad hoc bondholders’ committee had earlier complained that it “does not believe that the company’s current 8% proposal…is treating convertible bondholders equitably”. Convertible bondholders said that they would prefer to seek a consensual restructuring with the company and pressed for an out-of-court settlement.
But MyTravel upped the pressure, claiming that failure to execute the proposed debt restructuring could lead to the firm losing its licence with the Civil Aviation Authority.
In the statement, bondholders noted their past support for MyTravel. In 2003, MyTravel faced a liquidity crisis; convertible bondholders helped the firm through this by extending the maturity of their bonds by three years, from January 2004 to January 2007.