Skadden rescues Completel from debt

Skadden Arps Slate Meagher & Flom has helped secure the future of Dutch telecoms group Completel Europe in a precedent-setting, US-style restructuring plan.
The programme to recapitalise the business, which first announced in May that it needed an extra e30m (£18.8m) to break even, was undertaken using a Dutch suspension of payments procedure and pre-negotiated plan called an 'akkoord'.
Skadden said it is the first time an akkoord has been used to restructure a high-yield bond debt without a parallel bankruptcy filing.
As part of the restructure, e47m (£29.5) of new equity capital was injected into the company while e230m (£144m) of high-yield bonds were converted into equity.
Richard Ely, a London-based partner at Skadden, said: “This is the first really successful pre-packaged bankruptcy in Europe and has been completed off the back of high-yield debt.
“It is a US approach to restructuring where we do pre-package bankruptcies all the time.”
The implementation of the US-style restructure could set a trend on how to deal with the swelling number of companies that face difficulties making huge interest repayments on bonds that were previously issued in more buoyant times.
During the second quarter of this year, the total number of high-yield bond defaults reached $42bn (£26.9), the highest-ever quarterly total, according to ratings agency Moody's, while Standard & Poor's said that default rates in the EU outstripped both the US and global rates during the second quarter.
In terms of the Completel deal, the company signed an agreement with an ad hoc committee of bondholders that owned debt in the parent company Completel Europe NV in support of the restructure.
Then, with the backing of more than 75 per cent of its bondholders, the company filed for protection from its creditors and submitted a composition plan for the recapitalisation to the Dutch courts.
Dutch firm Stibbe acted with Skadden to advise Completel on local aspects of the deal. Bingham McCutchen's London office and Dutch firm Van Doorne acted for the bondholders.