Court rules in favor of holders of Aristocrat Leisure's convertibles after years-long damages trial

By Jennifer Chiou

New York, Oct. 23 - Aristocrat Leisure Ltd. announced that the jury trial to determine consequential damages held in the U.S. District Court for the Southern District of New York ruled in favor of holders of the company's 5% convertible subordinated bonds due 2006.

In the verdict against the company, the court sought to determine the recoverability, if any, of consequential damages dating to 2004 claimed by certain bondholders.

The jury found that the company did not prove that the claimant bondholders failed to take reasonable steps to mitigate their consequential damages.

Accordingly, these bondholders will be permitted to recover consequential damages, according to a news release.

Aristocrat said it expects that the precise amount of consequential damages that will be recoverable will be determined by the court following further briefing by the parties.

On Aug. 9, 2006, the company said it reached agreement with holders of 81% of its 5% convertibles to make a principal payment. Under the terms of the deal, the company was to pay the principal amount of the bonds, a total of $104.7 million.

In the prior agreement, no further interest was payable on the principal. The agreement was without prejudice to either side's position in litigation.

Aristocrat previously said on May 30, 2006 that it would appeal part of a new court decision over the redemption of the bonds on Dec. 20, 2004.

The company also said at that time in 2006 that it had offered without prejudice to repay the $130 million principal amount of the convertibles at their maturity on May 31, 2006, but the bondholders had refused - although Aristocrat noted that this was before the latest court decision.

In the May 2006 ruling, the U.S. District Court for the Southern District of New York granted the bondholders' motion for summary judgment in a declaration that Aristocrat was in breach of its obligations to deliver shares to the bondholders, except for one investor.

The court previously denied the bondholders' motion that they were entitled to newly issued stock and dividends. It also had ordered that the statutory pre-judgment interest rate of 9% be applied to damages.

Aristocrat previously said it intended to appeal the order to the extent that it was adverse to its interests.

The Sydney, Australia, gaming equipment and software company had announced the call in December 2004 and said at the time it expected a court battle before the securities could actually be redeemed. Aristocrat already noted that its stock had met the condition for the call that it trade above 140% of the conversion price for more than 20 out of 30 trading days. The call terminates the holders' right to convert the bonds.

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