Hedge fund that nearly brought down Peru wants COLT dead

Vulture Capitalists swoop

A New York-based hedge fund wants to have COLT Telecom wound up. Highberry Ltd has notified the board of the alternative telco carrier that it seeking the appointment of an administrator. It says that COLT will not be able to repay or refinance its bonds
when they become due between 2005 and 2009.

COLT has today issued a statement to the London Stock Exchange, in which it says: "There is no basis whatever for Highberry taking this action."

And also:

"The Board will take whatever steps are required to protect the interests of its stakeholders against this self-serving attempt to force an unjustified transfer of value from shareholders to bondholders."

Here is the COLT's defence against Highberry's accusation.

  • Approx. £1 billion of cash, with no bank debt.
  • EBITDA is growing and capital expenditure requirement is reducing, as the core network construction is now complete.
  • Expects to be free cashflow positive during 2005.
  • Confident of ability to repay or refinance it bonds when they fall due.

Highberry is part of New York-based Elliott Group, a hedge fund, which holds senior notes and senior convertible notes issued by COLT, it has told the company. Is this by any chance related to Elliott Associates, the New York hedge fund which earned huge notoriety in 2000 for buying up third world debt at deep discount and then sueing governments in the US for full face value. Successfully

Elliott Associates does not maintain a big presence on the Web, exactly. Its home page simply features a company logo, and access to the rest of the site is password-protected.

But the firm is not backwards in coming forwards when it comes to pursuing litigation through the courts of the world, according to this statement of law firm Dechert.

"We have represented a broad range of clients in international disputes, including: ...

"Elliott Associates LP, a New York-based hedge fund, in litigation in New York, Miami, London, Brussels, Frankfort, Winnipeg, Toronto, The Hague, and Madrid. Our client collected US$58 million in a judgment against The Republic of Peru and Banco Nacional de la Peru, which had defaulted on sovereign debt."

Bootnote

On Sept 30, COLT Telecom announced that Marina Wyatt is appointed as Chief Financial Officer with effect from November 4. She joins from Psion, where she is working out her notice as group financial director. This is certainly a baptism of fire. ®

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