Hungary’s Magyar Telecom (Invitel) is seeking a court sanction of its scheme of arrangement for its financial restructuring.
The highly-leveraged telco, registered as an overseas company in the UK, had hoped to carry out the restructuring in line with…
Hungary’s Magyar Telecom (Invitel) is seeking a court sanction of its scheme of arrangement for its financial restructuring.
The highly-leveraged telco, registered as an overseas company in the UK, had hoped to carry out the restructuring in line with an exchange solicitation, as opposed to the scheme, but said today that it may not be able to get the necessary approval from UK tax authorities, the HMRC, in time.
Stephen Phillips, a partner with White & Case, the telco’s legal adviser for the restructuring, explained that an exchange solicitation would have made the restructuring process simpler and more cost effective. The telco explained that the restructuring consideration due to note creditors is identical whether the process is carried out in accordance with the scheme or the exchange solicitation.
Magyar Telecom, owned by private equity firm Mid Europa Partners, will seek the order from the High Court of Justice in England and Wales to sanction the scheme today.
The telco revealed today that holders of more than 90% of its €328.96m 9.5% senior secured notes due 2016 had tendered their notes by yesterday’s deadline – the required threshold for the exchange solicitation. However, the company said HMRC may not be able to confirm in time that the restructuring steps required to effect the exchange solicitation would not create a corporate tax liability.
Magyar Telecom has also filed for bankruptcy in the US. Chapter 15 of the US Bankruptcy Code protects foreign companies from US creditor claims and lawsuits while they reorganise abroad. The US Bankruptcy Court has scheduled a hearing to consider Magyar Telecom’s request for chapter 15 relief for 3 December in New York.
Magyar Telecom launched a strategic review of its capital structure in February in light of new tax legislation and the weak Hungarian macroeconomic environment. The company mandated Houlihan Lokey as its financial adviser for the review and White & Case as its legal adviser.
In June, the telco failed to make an interest payment on the €328.96m notes and was subsequently granted permission from a UK court to hold a meeting of creditors to consider a restructuring plan. Magyar Telecom announced yesterday that creditors had approved the restructuring by scheme of arrangement.
In July, the telco entered into an agreement with noteholders to carry out a financial restructuring aimed at cutting debt and generally improving the balance sheet. At the time, the company said the agreement, subject to requisite approvals, would see €155m of the existing notes either retained or exchanged into new, reinstated notes. The remaining €174m in notes and accrued interest would be converted into 49% of the pro-forma, post-restructuring equity in the telco. Meanwhile, €21m of the notes would be written off when the transaction closes.
As equity sponsor, Mid Europa would invest €25m when the restructuring closes, specifically €15m in equity and €10m in debt. The firm would retain 51% of the pro-forma, post-restructuring equity in the group, subject to certain conditions.