Hellas Telecommunications files bankruptcy, seeks stay of lawsuits

By Caroline Salls

Pittsburgh, Feb. 16 - Hellas Telecommunications (Luxembourg) II SCA made a Chapter 15 bankruptcy filing Thursday in the U.S. Bankruptcy Court for the Southern District of New York.

Joint liquidators Andrew Lawrence Hosking and Carl Jackson are asking the bankruptcy court to recognize Hellas' compulsory liquidation proceeding pending before the High Court of Justice of England.

The liquidators said the Chapter 15 case was filed to obtain a stay of lawsuits pending against the company in the Supreme Court of the State of New York, which include fraudulent conveyance and related claims.

Specifically, the recognition motion said lawsuits have been filed in the New York Supreme Court by subordinated noteholder Cortlandt Street Recovery Corp. and PIK note plaintiffs Cortlandt and PIK notes trustee Wilmington Trust Co.

In the subordinated note lawsuit, Cortlandt contends that December 2006 distributions, and all transactions related to those distributions, were a fraudulent "bleed out" of the company, damaging Cortlandt in the amount of €77.1 million, with default interest running at 7.1% from Oct. 15, 2009.

Cortlandt said in its argument that Hellas was already insolvent at the time of the 2006 distributions, lacked the resources to pay its creditors and had no annual net profits or surplus to distribute to shareholders.

In addition, Cortlandt claims that the portion of the distributions related to the redemption of the company's convertible preferred equity certificates (CPECs) alone created a €1 billion deficit that greatly deepened Hellas' insolvency.

On these bases, Cortlandt said it is seeking to have the December 2006 distributions annulled to the extent necessary for Cortlandt to be paid in full.

The company said several PIK note lawsuits raise basically the same issues covered in the subordinated note suit, except in connection with PIK notes.

Through the PIK note lawsuits, Cortlandt and the trustee are looking to unwind the December 2006 distributions to the extent necessary to pay them the €268 million plus interest they are allegedly owed.

Under English law, only the liquidators have the right to bring some types of actions for the benefit of creditors as a whole, including those based on fraudulent conveyance, preferential transfers and similar actions.

Hosking and Jackson said in their argument that the stay would keep them from "needlessly expending time and money defending actions in which they may be the proper plaintiffs," and would give them time to decide whether the claims raised in the lawsuits are valid and worth prosecuting.

According to court documents, Hellas has more than $100 million in both assets and debt.

The company is represented by Chadbourne & Parke LLP.

Hellas Telecommunications (Luxembourg) II is incorporated in Luxembourg and has offices in London. It is the parent company of Wind Hellas Telecommunications SA, a telecommunications company based in Maroussi, Greece.

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