Clifden disputes trustee fee related to tender for class A, B floaters

By Susanna Moon

Chicago, May 23 – Clifden IOM No.1 Ltd. said it is arguing against trustee fees in connection with its cash tender offer that had been set to end at noon ET on May 18.

On May 10, Fairhold Securitisation Ltd. trustee GLAS Trust Corp. Ltd. notified holders that it had not begun any “enforcement” proceedings regarding the £413.7 million of class A secured floating-rate notes due 2017 and £29.8 million of class B secured floating-rate notes due 2017.

Then on May 17, Clifden, as agent for the tendering noteholders, wrote to the note trustee regarding the report dated April 16, which said the trustee had incurred fees of £3,152,630.31 during the reporting period, according to a company notice.

In the opinion of Clifden, the April 2018 note trustee fees are potentially excessive and not commensurate with note trustee fees incurred over the last few reporting periods.

Clifden said it has asked a breakdown of those fees “and has put the note trustee on notice that it needs to be demonstrated that the [fees] were properly incurred.”

On May 22, Clifden received a response from the trustee that stated that all of the costs were “properly incurred” and that the cash manager will provide an update with the breakdown of the fees.

The company said it seeks the cash manager update by May 30.

Clifden then said it “continues to reserve all of its rights including seeking injunctive relief against the note trustee and to bring a claim against the note trustee in respect of any breach of duty, and to seek a declaration that as a result of such breach the note trustee shall not be entitled to rely upon any indemnity (whether statutory, contractual or otherwise) in its favor from the issuer or the noteholders.”

More background

On May 1, an ad hoc group of Fairhold’s class A floaters and class B floaters said that none of them will take part in the tender offer being run by Clifden.

Then on May 3, Clifden said it amended its cash tender offer for the Fairhold notes that was set to run on May 18.

For the class A notes tendered after May 3, the purchase price was amended to read 54.5, according to an update by Clifden on May 17.

As of the notice, holders had tendered £40 million of the class A notes.

Clifden said it would accept the tendered notes for purchase if “a sufficient principal amount of that class of notes is tendered to allow the offeror to establish its required holding of notes,” according to a separate company notice that day.

The “required holding” of the class A notes is £104 million, the company had said. There is no required holding for the class B notes.

Clifden began tendering for the notes on Feb. 20 and amended the terms on March 21 so that for class A notes tendered after the early deadline, the purchase price was amended to read 1%. Originally, the purchase price was 40% with an early tender premium of 20%.

For the class B floaters, the purchase price is 1% with an early tender premium of 4%.

There was no change to the purchase price for the class B notes, which remains 1%, the release added.

The early tender deadline also was extended to noon ET on March 28 from March 2.

The offers as most recently amended provide “a purchase price materially greater than the envisaged recovery (if any) from the issuer,” according to the separate company notice.

The amendments also provide “certainty of execution,” an interim distribution to noteholders of 10% of par and a settlement date of no later than Sept. 28.

Clifden said, “If the issuer is required to pay amounts claimed by the issuer swap counterparties, net distributions to noteholders are likely to be materially less than the purchase price payable under the offers, and may be nil.”

More details

Clifden said that if obtains the needed tenders to establish the required holding of class A notes, it would direct the trustee to serve a note enforcement notice on the issuer and to enforce some of the security for the notes.

Furthermore, the company is proposing to appoint an administrator of the issuer and a fixed charge receiver over the shares of Fairhold Finance Ltd.

Fairhold Equity Investments Ltd., an affiliate of the offeror, will acquire the shares of FFL from the fixed charge receiver for £1. Fairhold Credit Investments Ltd., also an affiliate of the offeror, will acquire the funding loans, the swaps and any cash at bank from the administrator of the issuer for a cash amount.

After the acquisitions, a “rationalization process” will be held by the offeror, which will involve the transfer of the freehold rights into a newly established subsidiary of FFL.

Afterward, the offeror will effect settlement of the notes accepted for purchase by Sept. 28. Fairhold Credit Investments will guarantee settlement. In addition, after the acquisitions, holders of notes accepted for purchase will have direct recourse to Fairhold Finance and to the property owners as an additional guarantee of settlement.

Morrow Sodali Ltd. (+44 20 3879 5462 or fairhold@morrowsodali.com) is the tender agent.

Fairhold noteholder group responds

Together, the ad hoc group holds about 60% of the class A notes, more than 75% of the class B notes and 100% of the tranche C notes and I3 note HAS, the group said.

As a result, the ad hoc group now includes funds advised by Angelo, Gordon & Co., LP, by Avenue Europe International Management, LP, by CVC Credit Partners Investment Management Ltd. and by Hayfin Capital Management LLP.

“With the addition of new members to the ad hoc group, the supportive noteholders and the enhanced level of control, the ad hoc group is optimistic that progress can be made,” according to an announcement by the noteholders ad hoc group.

The ad hoc group and its advisers “are actively pursuing further plans and considering all options including enforcement. As part of these plans, it is anticipated that some or all of the ad hoc group may go private and become restricted from trading at the relevant time in the future,” the release noted.

The ad hoc group also is holding “close and regular dialogue with a number of other sizable class A noteholders who are supportive of the ad hoc group's approach” and together they hold more than 80% of the class A notes, the release added.

For questions, contact glen.cronin@rothschild.com or +44 0 20 7280 5506, richard.tett@freshfields.com or +44 0 20 7832 7627, simon.lalande@rothschild.com or +44 0 20 7280 1589 or christopher.barratt@freshfields.com or +44 0 20 7832 7101.

Fairhold Securitisation is incorporated in the Cayman Islands.

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