Lebara creditors threaten debt-for-equity swap after late interest payment

Wednesday 12 June 2019 | 12:04 CET | News

Debt holders in MVNO Lebara have asked the company to meet interest payments, in a move that could wrest control of the company from investment company Palmarium, the Financial Times reported. Palmarium bought Lebara in September 2017 for EUR 420 million, funding the acquisition through a EUR 350 million bond sale. The owners of this debt said they will swap their holdings into equity if Palmarium does not pay interest within three days, according to a statement on the Oslo stock exchange. The bond transaction will be submitted to a Dutch court, since one of the parents of Lebara, Vieo, is registered in the Netherlands, Het Financieele Dagblad reported. 

The move comes after Lebara failed to meet an interest payment last week and to file annual accounts last month. There have been other discrepancies. An earlier story in the FT claims that Palmarium misrepresented Lebara’s EBITDA was in 2016, by not including loss-making subsidiaries. Pareto Securities, which arranged the bond deal, then came under shareholder scrutiny on how it performed its due diligence on Palmarium when it bought Lebara. At the time, Palmarium told bond investors it held EUR 2 billion in assets but declined to disclose what the investments were. 

Palmarium came under scrutiny again in 2018 for some fees it charged Lebara and for several related party transactions, including the sale of Lebara Play, a Netflix-inspired service with a library of Tamil language films. The FT infers the unit was sold to Lebara’s original Sri Lankan founders for a very low amount, namely GBP 1. 

In the statement to the Oslo stock exchange, the bondholders said they were also “surprised” by how much Palmarium received from Lebara for advice on the sale of its Spanish unit in November 2018, adding that the fee “likely contravenes” the terms of the bid. 

The bondholders are mainly Swedish and Norwegian institutional investors. The UK’s Jupiter Asset Management is the largest single holder, with EUR 27.5 million, according to Bloomberg data.

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Categories: Mobile & Wireless
Companies: Lebara
Countries: Europe
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