Two mainstays of the private equity industry, Apax and TPG, found themselves in a European court last week in a legal dispute that thrust the workings of buyout groups into the spotlight.
The two groups were accused in Luxembourg of having wrongly siphoned €1bn (£720m) out of Greece’s first wireless operator, TIM Hellas. The hearing was the latest stage in a case that has been in and out of the courts since 2011 – two years after TIM Hellas collapsed into administration
Joint liquidators to the group argued that TIM Hellas “did not in the slightest have the available profit” to redeem shares held by the private equity houses in a refinancing deal. Instead, the money to redeem the shares was funded by more than €1bn of debt issued by TIM Hellas, then part of a telecoms holding company that had been moved to Luxembourg. According to the TIM Hellas liquidators, this breached Luxembourg rules.
Bertrand des Pallières, chief executive of SPQR Capital, one of the group of creditors, said: “You cannot take €1bn out of a company that has no reserves. It would open the door to the wholesale looting of companies.”
The case was heard at a hearing lasting about two hours in a court in Luxembourg, in front of three judges. Their ruling will be announced on 23 December.
In the writ that was served ahead of the case, the liquidators said it was “extremely abusive ... to practically hand over €1bn non-refundable to shareholders”. If the Luxembourg ruling goes their way, the liquidators hope it will help reinforce civil litigation brought against the private equity firms in the US. The private equity houses deny anything untoward about the refinancing. “This is completely untrue and an outrageous mischaracterisation of events,” Apax and TPG said in a statement.
They say the liquidators’ attempts to blame the eventual collapse of Hellas on the refinancing is wrong. Apax and TPG said that, at the time of the deal, Hellas was in good financial health and there was “significant available cash to service the debt based on the company’s strong performance”. They added that Hellas collapsed three years after the transaction took place.
“We are vigorously and successfully defending the many lawsuits of the claimants,” said Apax and TPG.
The furore is unlikely to deter the buyout groups that are circling Greek state assets due to be put up for sale by the government of prime minister Alexis Tsipras under the terms of the country’s latest bailout programme.
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