Keep knowledgeable with free updates
Merely signal as much as the Hedge funds myFT Digest — delivered on to your inbox.
Hedge funds are battling over the debt of one in every of Europe’s largest lingerie manufacturers, as US-style so-called creditor-on-creditor violence seeps into the continent’s markets.
Redwood Capital this month seized management of Dutch lingerie retailer Hunkemöller, the newest in a string of sharp-elbowed manoeuvres that enabled the New York-based distressed debt specialist to leapfrog different lenders so as of precedence.
A rival group of collectors led by Cheyne Strategic Worth Credit score is now contemplating a variety of authorized choices in Europe in a bid to reverse Redwood’s takeover, in accordance with individuals conversant in their plans. The group, which additionally consists of Man Group, Contrarian Capital and St James’s Place, already sued the US distressed debt specialist and Hunkemöller in New York in November over an earlier transaction that allegedly violated the phrases of their bonds.
The dispute over management of the struggling retailer is harking back to the aggressive confrontations between collectors which have develop into commonplace within the US however have solely just lately begun to look in Europe.
Final 12 months, Hunkemöller agreed to borrow €50mn from its largest current bondholder, Redwood, because it sought to restore its funds.
In 2023, score company S&P had warned that, “absent enchancment in working efficiency past our base case”, the corporate’s capital construction risked “changing into unsustainable”.
Below the transaction, Redwood lent Hunkemöller €50mn in tremendous senior debt, which ranked forward of the entire firm’s excellent bonds. On the similar time, the hedge fund’s €186mn in bonds have been swapped for brand spanking new, higher-ranking notes of the identical worth.
Different collectors had approached the corporate to supply financing options however these choices weren’t taken, in accordance with individuals conversant in the matter.
In June, Hunkemöller confirmed that this new debt “can be paid out in precedence to different [senior secured notes]”.
The deal pushed the rival creditor group — whose €84mn of “senior secured” bonds have been leapfrogged by Redwood’s new “tremendous senior” debt — additional down the pecking order in its declare on Hunkemöller’s property.
In its US authorized motion, the group claimed that the so-called “up-tiering” transaction had “destroyed [the] contractual ensures” of their bond paperwork.
Cheyne declined to remark. Redwood and Hunkemöller didn’t reply to requests for remark.
Redwood has additionally been trying to goal different European corporations with comparable techniques, in accordance with individuals conversant in the matter, having just lately constructed a big place within the bonds of Victoria Plc, the troubled UK carpet maker that has been a provider of purple carpets to the royal household.
