Distressed Diaries — Sue me! Litigation on the rise as European LMEs become more aggressive

Litigation against aggressive liability management exercises in Europe is on the rise as creditors fight back against sponsor’s tactics to prime minority creditors.

Back in November a group of primed creditors in Dutch lingerie maker Hunkemoller filed a lawsuit in New York against US hedge fund Redwood after it uptiered its portion of the debt.

Redwood implemented the same tactic in another uptier transaction with UK carpet maker Victoria PLC’s notes, which primed minority holders.

More recently, in August a minority creditor in Swiss vending machine provider Selecta filed an appeal against its restructuring in a Dutch court.

In this episode of Distressed Diaries, 9fin’s senior distressed reporter Bianca Boorer sat down with Duane Loft, partner at Pallas Partners, who is representing the primed holders in Hunkemoller, and 9fin senior distressed credit analyst Denitsa Stoyanova CFA.

We discuss the Hunkemoller case, provide updates on the litigation process, and examine potential outcomes if Victoria's transaction faces legal challenges.

We also delve into what creditors should consider when deciding whether to litigate, how litigation can help with negotiations, and compare litigation practices in the US versus Europe. And for more background see here our three-part series on the Americanisation of European LMEs.