The Joint Compulsory Liquidators of Hellas Telecommunications (Luxembourg) II SCA, Andrew Hosking and Simon Bonney, after consultation with legal advisors and the company’s creditors’ committee, have filed a lawsuit against TPG Capital Management, L.P. and Apax Partners LLP, among other defendants, seeking damages of more than US$1.3 billion plus interest. The complaint filed in the United States Bankruptcy Court for the Southern District of New York alleges that TPG and Apax engaged in wrongdoing giving rise to claims of actual and constructive fraudulent conveyance and unjust enrichment.
According to the complaint, 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. Less than two months after that fraudulent transfer, the defendants disposed of Hellas and its subsidiaries, pocketing a windfall and leaving Hellas insolvent and staggering toward bankruptcy.
“We have filed this lawsuit for the benefit of Hellas’s estate and its creditors to seek redress for one of the very worst abuses in the private equity industry,” said Hosking. “The defendants systematically pillaged Hellas’s assets, by piling on debt, extracting exorbitant management and consulting fees, and making massive and improper distributions to themselves.”
Minimizing their own exposure, TPG and Apax contributed little of their own money to acquire the Greek telecommunications assets, leaving the newly acquired businesses highly leveraged from the outset. That debt burden significantly increased with time. Within a short period, the defendants orchestrated and implemented a scheme to extract more than $1.3 billion in additional funds borrowed by Hellas, leaving the company insolvent and creditors holding debt that could not be repaid. By the time they subsequently disposed of Hellas, the defendants had reaped a staggering return on their equity investment of nearly 2,000%.
Chadbourne & Parke LLP is serving as primary legal counsel to the Joint Compulsory Liquidators. The team led by New York partner Howard Seife previously obtained recognition of Hellas’s U.K. liquidation under Chapter 15 of the Bankruptcy Code. Hellas’s Chapter 15 case is pending in the United States Bankruptcy Court for the Southern District of New York before Judge Martin Glenn.
