First payout on Polly Peck

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The Independent Online
Creditors owed more than £1.3bn by Asil Nadir's crashed Polly Peck business empire will receive a payout for the first time since thegroup went bust five years ago, thanks to a dramatic court victory yesterday.

The ruling by a court in the breakaway Turkish Cypriot republic is the final death-blow to Mr Nadir's fresh fruit to electronics empire, one of the UK stock market's most sparkling performers before it crashed to earth in 1990.

Polly Peck was valued at £2bn on the London market when it went down. There has never been a real prospect of a payout for shareholders since the crash.

But the northern Cypriot court has recognised for the first time the authority of the administrators Coopers & Lybrand to seize and sell the fugitive bankrupt's network of properties and land on the island.

The administrator, Chris Barlow, an insolvency partner with Coopers, said: "We're very delighted with this judgment. It's a big step in the right direction."

The ruling clears the way for a 1.75 per cent payout to Polly Peck creditors in July followed by another 2.8 per cent soon after. Litigation aginst Polly Peck's auditors and the sale of Mr Nadir's Cypriot holdings could generate further payments totalling well over £300m, according to City sources.

Mr Nadir has relied on his close political contacts with the northern Cypriot government to prevent the administrators from seeing the books and selling the assets. Britain does not officially recognise the Turkish Cypriot republic. This has prevented the Serious Fraud Office from extraditing Mr Nadir since he jumped bail on £30m of theft charges in May 1993.

Last year his political credit seemed to be running out as the Government claimed £10m in back taxes and appointed its own managers to seize his assets.

This U-turn culminated yesterday in the courts recognising for the first time Coopers' legitimacy on the island. Coopers has been given the green light to pursue assets through Mr Nadir's labyrinthine corporate structure, on behalf of more than 200 banking creditors.

Two weeks ago Coopers sold two of Mr Nadir's luxury hotels in Cyprus as well as the Unipac and Sunzest fruit processing companies.

Thanks to yesterday's ruling Mr Barlow and colleagues can now sell off another hotel, the Crystal Cove, and gain access to Mr Nadir's books as well as "extensive" land and property.

The judgment follows a case filed by Mr Nadir in 1993 which argued that the administrators had no legal standing in the republic.

Mr Nadir's lawyers said yesterday that they would appeal and asked for 30 days to do so. The judge gave them seven days and ordered them to pay Coopers' costs, estimated at several hundred thousand pounds.

Mr Barlow said that the support of the courts was vital in pursuing Mr Nadir's assets.

The process has been dangerous for the administrators. In June last year Chris Hull, an employee in Coopers' Istanbul office, was beaten up outside his flat. Two months later David Adams, another Coopers man, was shot twice in the legs as he left the office, apparently mistaken for Mr Hull.

This New Year's Day the Turkish Cypriot bank that financed the purchase of the Jasmine and Palm Beach hotels on behalf of local businessmen was bombed.

Creditors are also hopeful they will get a payout from co-administrator Chris Morris of Touche Ross. Mr Morris is suing Polly Peck's former auditors, Stoy Hayward, for what some sources say is up to £300m. He is also suing Citibank for an estimated £70m in connection with a Polly Peck deal in which the bank was a lender.

The cases should be completed in a year or two unless the parties settle out of court, according to sources.

Creditors will meet on 26 April at Central Hall, Westminster, to approve Mr Barlow's payout scheme, a "scheme of arrangement" under section 425 of the Companies Act. Most favoured creditors are the £600m-worth of Swiss franc bondholders and £100m of German markholders. They are entitled to claim twice over by claiming from the subsidiary that issued the bonds as well as the holding company that guaranteed them. These bearer bonds have traded briskly since Polly Peck went under in1990.