MyTravel goes to court to ask for restructuring approval

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The Independent Online

The debt-saddled holiday company MyTravel pleaded with a judge yesterday to allow it to go ahead with a restructuring that would prevent it from going into liquidation. MyTravel had to take court action after its bondholders overwhelmingly rejected a proposed £800m debt-for-equity swap which would give them an 8 per cent share in the company - less than they wanted.

The debt-saddled holiday company MyTravel pleaded with a judge yesterday to allow it to go ahead with a restructuring that would prevent it from going into liquidation. MyTravel had to take court action after its bondholders overwhelmingly rejected a proposed £800m debt-for-equity swap which would give them an 8 per cent share in the company - less than they wanted.

MyTravel went to the High Court in London to seek permission to convene meetings with shareholders and lenders to approve an alternative scheme of arrangement, without the consent of the holders of £216m of convertible bonds. The scheme would transfer the equity and liabilities of the existing company into a new holding company, and MyTravel has threatened to slash the bondholders' stake to 2 per cent.

MyTravel's counsel, Richard Sheldon QC, told the judge yesterday: "It is common ground that if the company is to survive as a going concern, the company balance sheet needs to be restructured."

Michael Crystal QC represents an ad hoc committee of bondholders, identified as Fidelity Investments, Societe Generale Asset Management, Lehman Brothers and New Star Asset Management. He said the company had not been wound up yet and therefore the bondholders' claims ranked with those of other unsecured creditors. It was not appropriate for the court to allow a meeting which aims to transfer all the assets of the company to another company for the benefit of certain unsecured creditors and to the potential harm of others, he said. "This would effectively involve the court participating in a process which would resemble a fraudulent conveyance and create a potential whitewash of claims against the directors for mismanagement of the company," he told the judge.

MyTravel, which owns Airtours Holidays, Tradewinds and other travel assets, racked up £1.3bn in debts during an expansion drive. The company warned this week that it would lose its licence from the Civil Aviation Authority and cease trading if the restructuring is not implemented by the end of the year. If the company went bankrupt, bondholders would get nothing, as the convertible debt is subordinate to MyTravel's unsecured debt, the firm has said. It is desperately trying to complete the restructuring by year-end to avoid paying more interest on its huge borrowings.

The hearing continues. A judgment is not expected before next week.

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