MyTravel bondholders challenge rescue plans

Disgruntled MyTravel bondholders will go to the courts this week in a second attempt to halt the financial restructuring of the troubled tour operator.

Disgruntled MyTravel bondholders will go to the courts this week in a second attempt to halt the financial restructuring of the troubled tour operator.

The holders of £216m of convertible bonds will lodge an appeal against last Wednesday's High Court ruling that the directors of MyTravel could press ahead with the restructuring without their consent.

Mr Justice Mann declared that the bondholders had no economic interest in MyTravel's assets. But the bondholders, represented by law firm Cadwalader, Wickersham & Taft, will appeal against this, claiming that it sets a dangerous precedent.

The group, which is made up of Fidelity, Société Générale, Lehman Brothers and New Star Asset Management, will lodge a parallel appeal on procedural grounds. The bondholders have until Wednesday to appeal.

The bondholders originally objected to MyTravel's debt-for-equity rescue plan, which would have left them holding 8 per cent of the company, the lenders 88 per cent and existing shareholders 4 per cent.

The bondholders argued that they were not getting enough equity and persuaded the High Court to throw out the proposals because they contravened the Companies Act. However, MyTravel directors immediately submitted revised proposals, which were approved by the judge last Wednesday.

Under these proposals, MyTravel's bondholders will get only 2 per cent of the equity. Shareholders will be left with 4 per cent and the banks will get 94 per cent. But MyTravel has told the bondholders that they can get 8 per cent if they sign up to the proposals before 10 December. This looks unlikely, as a Court of Appeal ruling is not expected until later than this.

If the bondholders win their case next month, they plan to press for at least 10 per cent of MyTravel's equity.