BearingPoint says debenture default notices did not meet indenture requirements

By Caroline Salls

Pittsburgh, Nov. 8 - BearingPoint, Inc. outlined its argument that previous notices of default and the expected ensuing acceleration notices on its series A and series B convertible subordinated debentures are invalid and without merit because of improper notice procedures, according to an 8-K filing with the Securities and Exchange Commission.

On Monday, BearingPoint said it will reject as invalid and wholly without merit any acceleration notice that it may have received as early as Tuesday with respect to its series A or series B convertibles.

In the 8-K, BearingPoint said a notice of default must be provided by at least 25% of the recordholders or by the trustee, but neither notice of default on the debentures was provided by the recordholders or signed by the recordholders, as required under the indenture.

Also, BearingPoint said neither notice of default was signed by a duly appointed agent and the "purported" series B default notice did not identify any debentureholders.

The company also said the trustee has not given BearingPoint a notice of default.

In turn, without a proper notice of default related to the company's SEC reports, any subsequent notice of acceleration is invalid and without merit, the 8-K said.

In addition, BearingPoint said the debenture indenture only requires it to file the SEC reports with the trustee after it files the reports with the SEC.

"Other companies do have explicit obligations to file their SEC reports on a timely basis with the trustee. The company does not," BearingPoint said in the filing.

As previously reported, BearingPoint said it complied fully with its SEC filing obligations under the debentures.

The company said it intends to vigorously oppose any attempt to enforce an acceleration notice and will evaluate holding the relevant parties liable for any damage to the company and its investors "resulting from such an invalid and improper action."

On Sept. 16, BearingPoint disclosed that it had received purported notices of default from two law firms claiming to represent holders of the $250 million series A convertible debentures and the $200 million series B convertible debentures that were issued by the company in December 2004 and January 2005.

The 60-day period for the company to cure any purported default by filing its 2004 form 10-K and its 10-Q forms for 2005 was to have expired at the close of business on Tuesday with respect to the series B debentures and will expire at the close of business on Monday with respect to the series A debentures.

Both law firms have informally indicated that they intend to submit notices of acceleration to the company after the expiration of the purported cure periods, which would likely demand that BearingPoint repay the debentures immediately.

BearingPoint is a Mclean, Va.-based management consulting firm.

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