Colt Telecom Group Plc faces a three-day hearing at the London High Court in December when a hedge fund takes legal action to try to push the pan-European carrier into liquidation.
Highberry Ltd, which is part of New York-based Elliott Associates, claims that Colt will not have the funds necessary to repay or refinance around 1bn pounds ($1.5bn) in bonds due between 2005 and 2009. The claim is vigorously denied by Colt, which says it has cash reserves of 1bn pounds ($1.5bn).
Highberry wants to force Colt into administration, the UK equivalent of Chapter 11 protection in the US. As a bondholder, it would benefit from a debt-for-equity swap that would be an inevitable consequence of administration.
After a preliminary hearing yesterday, the High Court said it would schedule three days for the hearing, between December 2 and December 24. This is remarkably speedy in a UK court system that has become renowned for lengthy delays, but a judge granted Colt’s request for the hearing to be held as soon as possible because of the sensitivity of the case for the company. The very fact that it faces action has already weakened Colt’s share price.
The case will be watched with particular interest because if Highberry is successful, it will prompt copycat actions against other companies with high debt burdens.