Former directors of the troubled tour operator MyTravel, who presided over big losses in 2002 and 2003, were accused of gross mismanagement at a High Court hearing yesterday, but the company will not bring any claims against them.
The accusation came from a group of the company's bond-holders who are in court objecting to the group's attempts to force through a restructuring without their consent, which would leave them with only a 2 per cent stake.
Michael Crystal QC, acting for MyTravel's bondholders, questioned whether the company had explored whether there might be claims against some of its former directors for "gross mismanagement''. Mr Crystal represents an ad hoc committee of bondholders, comprising Fidelity Investments, Société Générale Asset Management, Lehman Brothers, and New Star Asset Management, but said he speaks on behalf of 75 per cent of the convertible bondholders.
Mr Crystal cross-examined Peter McHugh, MyTravel's chief executive. Mr Crystal asked: "So there are to be no claims against the directors who were in office when hundreds of millions of pounds of losses were made?'' Mr McHugh replied: "It would not have been appropriate to bring any claims.''
Mr Crystal noted that a number of MyTravel's former directors were "extremely wealthy men'', such as its former chairman David Crossland.
The company made a loss of £911m in 2003. It racked up £1.3bn in debt during an expansion drive but was forced to sell many of those assets. To slash those borrowings, MyTravel proposed last month an £800m debt-for-equity swap and offered its 20-plus creditors, led by Royal Bank of Scotland and Barclays, 88 per cent of the company while shareholders would get 4 per cent. Under that proposal, which was rejected, the bondholders would have got 8 per cent.
The company, which serves almost 7 million passengers a year, has gone to court to obtain the go-ahead for an alternative scheme of arrangement that would not require bondholders' approval, but the bondholders challenge this.
Mr Crystal questioned why problems with the company's accounts took so long to fix. He referred to a statement made in December 2003 that said significant accounting issues continued into 2003. Mr McHugh said: "A series of actions were put in place ... to cure the accounting problem but they were a bigger problem than we understood them to be and to fix them took time.''
Mr McHugh said there had been frequent discussions between the company and its advisers regarding the risk that the company might have to go into administration. He is set to receive a £2m bonus on completion of the restructuring.
The hearing continues.