Clifford Chance has been replaced as the leading adviser to a group of Queens Moat House (QMH) distressed debt holders in favour of Bingham McCutchen.
It is understood that Clifford Chance was asked to stand down as lead adviser two weeks ago by a group of investors who hold £227.7m in junior-term debt in the hotel group. The debt is due for repayment by 31 December 2005.
It appears that the group was intent on retaining a law firm with experience advising distressed debt and bondholders, as they had also approached Cadwalader Wickersham & Taft. However, it is believed that Cadwalader would have been conflicted in acting for the junior-term debt holders.
Clifford Chance has had a long relationship with QMH and is believed to have been instrumental in acting for the original syndicate of banks, led by Barclays, which invested in the junior-term debt.
QMH went through an extensive restructure in 1993. It was finalised in 1995 and resulted in £1.3bn worth of debt being reorganised. Since then, under new management, QMH has reduced its debt to £632m; however, this year the company recorded its first pre-tax loss since 1995 before exceptional costs of £3.7m for the year to 29 December 2002.
Three months ago at its annual general meeting, the company faced questions over its trading, specifically concerning its ability to comply with its financial covenants, which QMH maintained remained a “key objective”.
Clifford Chance declined to comment. Bingham McCutchen, Cadwalader and QMH could not be reached for comment.