Brussels to back British Energy rescue as rebels keep fighting

Click to follow
The Independent Online

Brussels is poised to approve the government-backed £5bn rescue of British Energy, the struggling nuclear electricity generator, perhaps as early as today.

Brussels is poised to approve the government-backed £5bn rescue of British Energy, the struggling nuclear electricity generator, perhaps as early as today.

Approval from Brussels comes as BE races to prevent a group of rebel shareholders from derailing the financial restructuring and forcing the company into insolvency.

BE applied to a court in New York yesterday for an injunction against Polygon Investment Partners, the US hedge fund leading the revolt, to try to prevent it going ahead with an extraordinary meeting to block the restructuring. The refinancing would hand over most of the company to its bondholders, leaving ordinary shareholders with just 2.5 per cent of the equity and warrants to subscribe for a further 5 per cent.

Polygon and another US investor, Brandes, who between them own 12 per cent of the company, are seeking shareholder approval for a change in BE's articles of association which would stop the company delisting its shares without shareholder approval.

If Polygon wins the vote, it will in effect scupper the restructuring. BE said that in this case it would come under an immediate obligation to repay £1.5bn to its creditors and could also face significant damages claims for breach of contract. "In these circumstances, there is a very real possibility that British Energy would be forced to commence insolvency proceedings," the company added. BE's application for an injunction is based on its claim that Polygon's filing with the US Securities and Exchange Commission in connection with its request for an EGM was "late and defective". Polygon responded that its filing was "accurate in all material respects", adding that BE's application was an attempt to undermine its statutory rights under English law.

Documents submitted to the New York court by BE accuse Polygon of seeking to mislead other investors and failing to make clear its true motives in acquiring the initial shareholding.

The judge in New York is expected to rule on BE's application today or tomorrow. If he rules against the company, Polygon will be able to hold its EGM a month from now, before the EGM BE intends to convene to seek shareholder approval for the creditors' restructuring agreement.

Comments