PE-backed bank HSH's bondholders file lawsuit against it

The investors are seeking a write-up to par of the tier 1 instruments and monetary damages for improperly missed coupons, for a total claim against HSH of €1bn, or €1.4bn including indirectly issued Sphere and Sparc tier 1 instruments.

The bondholders are alleging that HSH has engaged in various schemes for the purpose of writing down the value of the tier 1 instruments. A statement issued by the bondholders makes various allegations related to this, including the allegation that HSH sold its loan portfolio below market value in order to benefit its new shareholders at the expense of its bondholders.

The statement also alleges that HSH has violated contractual provisions on its tier 1 instruments and is seeking to unlawfully terminate tier 1 instruments. It further alleges that the bank is planning to use losses carried forward from 2017 to further write down tier 1 instruments.

"If HSH is allowed to get away with the actions announced in its 30 November 2018 release, namely to call the listed tier 1 instruments at 15% of their nominal value, this would create a €1.6bn windfall profit at the expense of the tier 1 instrument holders," said the bondholders in a statement.

In preparation for its lawsuit against HSH, the bondholders have sought judicial assistance to obtain discovery from affiliates of Cerberus Capital Management, JC Flowers and GoldenTree Asset Management, according to the statement.

Finally, the statement said that the bondholders are willing to engage with HSH and its advisers to find a mutually agreeable solution.

HSH had not responded to a request for comment at the time of publication.

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• Topics
• Investments
• Financials
• DACH
• Germany
• JC Flowers
• Cerberus Capital Management