Key Takeaways
- • CQS, Algebris Funds and Deltroit Asset Management have sued in New York, invoking the Sherman Act and New York's Donnelly Act, over an alleged anti-competitive "co-operation agreement" among majority bondholders in Selecta's restructuring, according to the Financial Times.
- • The named defendant group includes Invesco, Man Group, Strategic Value Partners and Diameter Capital, which the plaintiffs say delivered "disproportionate economic benefits" through a debt exchange from which they were excluded.
- • Majority-group bonds reportedly trade above 70 cents on the dollar, versus near 50 cents for the excluded holders' paper, highlighting the economic stakes of the dispute.
- • Legal observers describe the case as the first known use of antitrust law in a creditor-versus-creditor dispute, though analysts doubt the plaintiffs will succeed.
- • The case targets coordination agreements central to hedge fund strategies in complex restructurings, and non pro-rata restructurings are spreading from US distressed markets into Europe.
Summary
Hedge funds including CQS have opened a new legal front in the ongoing battles over distressed credit restructurings, invoking US antitrust statutes to challenge what they describe as collusive tactics among rival creditors, according to a report by the Financial Times.
In a lawsuit filed in New York, Manulife's CQS, together with Algebris Funds and Deltroit Asset Management, alleges that a group of majority bondholders struck an anti-competitive "co-operation agreement" during the restructuring of Swiss vending machine operator Selecta. The majority group is named as including Invesco, Man Group, Strategic Value Partners and Diameter Capital. The plaintiffs claim they were deliberately excluded from a debt exchange that delivered "disproportionate economic benefits" to participating creditors, in breach of both the Sherman Act and New York's Donnelly Act. Bonds held by the majority group reportedly trade above 70 cents on the dollar, while the excluded holders' paper trades near 50 cents.
The dispute stems from Selecta's €1.5bn restructuring, which used Dutch insolvency law to allow majority bondholders to seize control and coerce minority investors into a disadvantageous bond swap. Such non pro-rata restructurings, long a fixture in US distressed markets, are now spreading in Europe, testing the boundaries of creditor cooperation.
Legal observers say the case marks the first known use of antitrust law in a creditor-versus-creditor dispute, signalling growing tension within the distressed debt community. While analysts doubt the plaintiffs' chances of success, they view the case as a warning shot against the coordination agreements that have become central to hedge fund strategies in complex restructurings.
In a lawsuit filed in New York, Manulife's CQS, together with Algebris Funds and Deltroit Asset Management, alleges that a group of majority bondholders struck an anti-competitive "co-operation agreement" during the restructuring of Swiss vending machine operator Selecta. The majority group is named as including Invesco, Man Group, Strategic Value Partners and Diameter Capital. The plaintiffs claim they were deliberately excluded from a debt exchange that delivered "disproportionate economic benefits" to participating creditors, in breach of both the Sherman Act and New York's Donnelly Act. Bonds held by the majority group reportedly trade above 70 cents on the dollar, while the excluded holders' paper trades near 50 cents.
The dispute stems from Selecta's €1.5bn restructuring, which used Dutch insolvency law to allow majority bondholders to seize control and coerce minority investors into a disadvantageous bond swap. Such non pro-rata restructurings, long a fixture in US distressed markets, are now spreading in Europe, testing the boundaries of creditor cooperation.
Legal observers say the case marks the first known use of antitrust law in a creditor-versus-creditor dispute, signalling growing tension within the distressed debt community. While analysts doubt the plaintiffs' chances of success, they view the case as a warning shot against the coordination agreements that have become central to hedge fund strategies in complex restructurings.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.