Hellas liquidators take next steps targeting TPG, Apax

Bond holders from a former TPG and Apax portfolio company have won a $565 million judgment, which they intend to claim from the private equity giants.

The liquidators of former TPG and Apax Partners portfolio company Hellas Telecommunications have won a $565 million judgment as part of a legal dispute that accuses the private equity firms of unfairly loading Hellas with debt during their ownership.

TPG and Apax acquired Hellas for €1.1 billion in 2005, selling it to a third party for €3.4 billion in 2007. The Greek telecom company then collapsed in 2009 following the financial crisis.

The bond holders, including hedge fund SPQR Capital, allege that TPG and Apax used Hellas to “carry out the highly leveraged acquisition of a pair of Greek telecommunications businesses, before causing Hellas to borrow well in excess of $1 billion in additional funds that were then immediately siphoned out of the company without consideration,” according to a lawsuit filed in March.

However, Tuesday’s ruling in the New York Supreme Court is against the bond issuers, Hellas Telecommunications Finance and Hellas Finance, and not TPG and Apax. In order to get the money from TPG or Apax, the liquidators will have to show that the private equity firms were in control of the units and benefited from them.

“On one day in December 2006, a Hellas entity borrowed more than €1 billion and Apax/TPG immediately withdrew the loan proceeds, leaving Hellas with a deficit of more than €1 billion. The transaction was supposedly collateralized, but there was no collateral,” said Andrew Goldenberg of Stamell & Schager, SPQR’s law firm, in an email to pfm. “Our task now is to enforce the judgment against the people and entities who pocketed the money.”

In a September 14 summary judgment against the Hellas entities that issued and guaranteed the defaulted PIK (payment in kind) notes, the court dismissed all claims against Apax and TPG. However, Stamell & Schager lawyers say that the dismissal came on technical grounds of standing and does not go into the merits of the case. The plaintiff plans to appeal.

“Most cases like this don’t reach this point where you have a judgment,” said Jared Stamell of Stamell & Schager in a call with pfm. Though unsure of the timeline in retrieving the judgment, he estimated that the process may take a year or two years.

Still, TPG and Apax maintain that they have been exonerated from blame in the matter. “The dismissal of those claims speaks for itself,” said Apax spokesperson Todd Fogarty. “Apax and TPG, which sold their entire interest in the Hellas group approximately three years before the default on the PIK Notes, are not responsible for the judgment against the Hellas entities.”