Hellas liquidators’ €1 billion fraudulent transfer suit moves forward

By Caroline Salls

Pittsburgh, Sept. 10 – Hellas Telecommunications (Luxembourg) II SCA’s liquidators have received court approval to move forward with a fraudulent transfer and unjust enrichment lawsuit that seeks €1 billion from TPG Capital Management, LP and Apax Partners LLP, according to an order filed with the U.S. Bankruptcy Court for the Southern District of New York.

In the order allowing the liquidators to file an amended complaint to move the case forward, the court said liquidators Andrew Lawrence Hosking and Bruce Mackay were seeking approval in the original complaint to avoid and recover an initial transfer made by Hellas II to its parent entity in the amount of €1.57 billion and to avoid and recover €973.7 million of subsequent transfers allegedly made to several named defendants and an unnamed class of transferees.

The court said only the unjust enrichment claim survived against the U.S.-based original defendants, Apax and TPG, after an order on dismissal was entered.

Amended complaint

The liquidators then sought approval to file an amended complaint, which withdraws the unjust enrichment claim against Apax, adds and removes other defendants and pleads new fraudulent transfer causes of action under U.K. and Luxembourg law against several of the original defendants and proposed defendants.

The additional claims include a fraudulent transfer claim against all defendants except Apax and a fraudulent trading claim against all defendants except for TPG affiliate defendants and the transferee class.

The first amended complaint also asserts an unjust enrichment claim against the TPG Capital defendants, the TPG Advisors IV defendants, several TPG affiliate defendants, William S. Price III and TCW Capital Investment Corp.

Ruling details

According to liquidator counsel Chadbourne & Parke LLC’s blog, entitled “Zone of Insolvency,” the bankruptcy court found that the liquidators’ fraudulent trading claims were adequate under section 213 of the U.K. Insolvency Act and that their argument that TPG and Apax knew about the transaction in question was enough for the claims to proceed.

“The first amended complaint alleges facts giving rise to the strong inference that Hellas II carried on business with the intent to defraud its creditors when it executed the December 2006 CPEC redemption and the consulting fee transfer,” the court said in its ruling.

Specifically, the court said the amended complaint alleged that Hellas carried out the transaction “in knowing disregard” of the fact that it was insolvent or would be rendered insolvent by the transaction. The court also said the company could foresee the “disastrous consequences” for Hellas and its creditors, particularly the holders of subordinated notes.

“Hellas II’s intent to defraud creditors through this transaction is further supported by the allegation that the December 2006 CPEC redemption ‘was made without fair or adequate consideration because the CPECs were redeemed at a premium of €951.3 million over their aggregate par value,’” the ruling said.

The court said Hellas II allegedly fixed the redemption price for the transaction “without a good-faith, arm’s-length determination of market value” and without obtaining an independent appraisal.

“Accepting all the alleged facts as true, the court concludes that the first amended complaint pleads facts giving rise to the strong inference that each of the TPG defendants had the requisite scienter to support liability under section 213 of the Insolvency Act,” the ruling said.

“While TPG’s active participation in the December 2006 Transaction was primarily taken through the actions of non-party TPG Europe’s employees, TPG Capital and TPG Europe share a unified management.

“The December 2006 transaction was allegedly submitted to [TPG’s] ultimate decision makers for approval and received their blessing, notwithstanding that concerns regarding the quantum of debt involved in the transaction and the ‘crisis and setback [that needed] to be absolutely avoided’ were shared with one of TPG Capital’s co-founders.

“These shared concerns raise a strong inference that the TPG defendants’ top brass had a factual basis to suspect that Hellas II was carrying on business with a fraudulent purpose through the December 2006 transaction, but the TPG defendants turned a blind eye to this suspicion.”

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. The company filed for bankruptcy on Feb. 16, 2012 under Chapter 15 case number 12-10631.

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