What MyTravel means for bondholders
March 01, 2005
The timeframe imposed on the MyTravel restructuring by regulatory
considerations forced the company to take a tough line with bondholders. William Underhill and Caroline Edwards report
In the restructuring of MyTravel, completed at the end of 2004,
bondholders challenged the company's right to pursue a scheme of
arrangement without their agreement. The MyTravel restructuring
presented the difficulties that arise when competing interests have
to be balanced in a complex restructuring involving numerous
creditor groups. In this case, the usual problems were compounded
by the contraints of a regulated business. This had two important
implications: time was limited, with an absolute cut-off after
which the regulator was expected to act; and the consequence if the
regulator did act would would be an immediate and irremediable loss
of value for all creditors. The process was therefore shorter than
would normally be the case for a restructuring of this complexity -
less than three months from the first formal proposal to creditors
to completion. The other notable result was that the borrower
resorted to a court process to bring bondholders reluctantly to
accept the allocation of equity initially proposed....
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