| HONG KONG
HONG KONG Feb 11 Global A&T Electronics (GATE)
bondholders including investors such as Blackstone and Farallon
have filed a lawsuit against the company seeking the reversal of
a debt swap that allowed higher priority to junior noteholders.
The lawsuit was filed by Lowenstein Sandler, a U.S.-based
law firm representing nearly half of the bondholders of the
pre-swap $625 million outstanding amount of senior bonds due
The action follows a notice served on GATE last November by
investors demanding the nullification of the exchange, which
involved more than $500 million of junior notes being swapped
for senior notes, resulting in the total outstanding amount on
the 2019 notes rising to $1.1 billion.
Distressed debt experts say the swap had helped the company
avoid a potential restructuring which could have resulted in
dilution of ownership.
The lawsuit was filed in the New York County Supreme Court
during U.S. hours on Monday.
Singapore-based GATE is the parent company of UTAC, a
semiconductor business that was taken private by Affinity Equity
Partners and TPG Capital Partners in a S$2.2 billion
($1.8 billion) leveraged buyout in 2007.
"We have not received a copy of any lawsuit, but we stand by
our prior comments that the exchange was in full compliance with
all agreements. We may comment further in the event we receive
any legal filings," a company spokeswoman said.
Affinity and TPG Capital could not be reached for immediate
GATE's heavy debt burden has already put a strain on its
cashflow and Moody's has warned of a downgrade on its Caa1
rating which has a negative outlook.
The agency said chances of a downgrade could rise if the
company had to reverse the swap, which would raise the near-term
liquidity risk because the junior notes were to mature in 2015
under the original schedule.
Last week, UTAC agreed to buy from Panasonic Corp
three chip assembly unit operating plants in Indonesia, Malaysia
Moody's said the deal, with price tag of $116.5 million plus
transaction related fees, is credit negative as it "comes at a
time when GATE is facing considerable uncertainty arising from
an ongoing legal dispute with bondholders."
Following the debt swap in 2013, the bonds due in 2019 had
sold off amid worries about higher senior leverage and dilution
The bond price tumbled to a low of 68 cents on the dollar
from 88 cents before the exchange. They have since recovered to
around 86 cents, ahead of the lawsuit.
In recent years, events such as the acquisition of
Australia's Nine Entertainment by senior creditors and
Affinity's sale of its majority stake in shipping firm Jaya
Holdings Ltd., following a restructuring, have served to remind
investors they can risk loss of control.
The dispute at GATE festers as Affinity in January closed a
$3.8 billion fourth fund, the biggest ever raised for an Asian
firm outside Australia.