Barclays can vote on a proposal to restructure £660 million of General Healthcare Group’s (GHG) ‘propco’ debts, after a High Court written judgement rejected the bank’s “a hundred per cent U-turn”.
Justice Peter Smith, who presided over the convoluted case heard in the High Court of Justice’s Chancery Division on 14th August, ruled instead that the UK bank retains its voting entitlement, despite its own evidence to the contrary.
The legal dispute over voting entitlements has arisen out of a lack of clarity as to the voting powers of two sets of senior notes within the two securitisations which form part of the wider £1.5 billion debt stack, which secures GHG’s 35 regionally-spread specialist care homes throughout the UK.
The bank was among a group of senior lenders who had asked the court to clarify their voting rights. GHG, which runs 69 hospitals in the UK under the BMI brand, owes around £1.5 billion in loans to its property arm due to mature in October.
Citicorp Trustee Company, a subsidiary of Citigroup and trustee to the £660 million of the debt, has warned that without restructuring “a security shortfall” will be likely. But senior lenders to GHG say they want a restructuring agreement involving asset sales, while junior lenders are pushing to extend the date of repayment of the debts.
Citicorp is anyway unable to proceed with a restructuring without approval from Barclays – which holds £288 million of senior notes – and the Dutch Rabobank International, which holds £154 million.
South Africa-based Netcare acquired the majority share in GHG in 2006, when it split the company into an ‘opco-propco’ model. Its propco debt has been ring-fenced and cannot affect BMI Healthcare, the opco, or Netcare.
The reason for Barclays’ “somersault”, described by Justice Peter Smith, in respect of its position on its own voting powers, was likely the result of opposing positions between Barclays and Ambac in respect of the upcoming £1.5 billion GHG restructuring negotiations.
As a result of the ruling, Ambac, a New York-based guarantor of structured finance obligations, with which Barclays entered into hedging contracts with, retains control over how Barclays votes under the terms of the credit protection contracts.
Friday’s judgement, which is subject to appeal, is expected to help determine the viability of a consensual restructuring of the outstanding debt and prevent a loan enforcement of the 35 separate loans, which would crystallise GHG’s £577 million mark-to-market interest rate swap liability.
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