Lazard Freres under fire on GPA: Bankers allege last-minute change of plan on bonds

THE ROLE played by Lazard Freres, the New York investment bank, during the rescue of GPA yesterday came under fire from bankers to the embattled aircraft leasing group.

They were angered that Lazard appeared to have switched at the last minute from representing bondholders to trading the company's bonds in the market.

A bond trader said: 'I believe they decided there was more money in it for them in trading the bonds than representing the bondholders.'

Lazard Freres was expected to negotiate for a number of GPA bondholders in what were expected to be tough talks over rescheduling the bonds and converting some into equity.

GPA bonds traded at large discounts to face value in recent weeks because of a belief that the company would be forced to declare a moratorium on debt repayment and perhaps be forced into examinership, the Irish equivalent of administration.

But GPA is likely to be rescued from this fate by a dollars 1.35bn deal agreed earlier this week that is expected to lead to the eventual takeover of the Irish firm by GE Capital Corporation, a financial subsidiary of General Electric of the US.

On Tuesday the banks met secretly and agreed to back the GE Capital Corporation plan. Coincidentally, Lazard on Tuesday backed away from plans to represent the bondholders. The announcement of the rescue came late on Wednesday after further negotiations between GPA and GE Capital.

Market sources said Lazard blamed its change of plans on the fact that its trading desk was buying GPA bonds. The value of the bonds was on a switchback ride as expectations of a collapse came and went. The bonds traded as low as 20 cents in the dollar, back up to 60 cents and settled at 46 cents by yesterday, reflecting substantial obstacles that GPA has to overcome before the deal can go through.

A spokeswoman for Lazard Freres in New York refused to confirm that the firm had been planning to represent the bondholders or that it had backed out because it was trading bonds. She said: 'We are not commenting on the situation at all.' It is understood that the Blackstone group, another US investment bank, has taken on the job of representing bondholders.