Phones 4u bondholders warned further shop sales are unlikely

MIDLAND law firm Hill Hofstetter has advised senior bondholders of the collapsed Phones4U Finance to ensure they take unified action to protect their interests, especially followings warnings that further shop sales are unlikely.

The law firm said it was vital anyone with the stake in the Newcastle-under-Lyme business heeded the advice of administrators from PwC and formed themselves into a group to unify and strengthen their position in dealing with the future of their assets.

Helen Mulcahy, partner at Hill Hofstetter, said: “PwC stressed the need for senior bondholders to form a committee and meet with them, specifically bondholders of the £430m 9.5% Senior Secured Notes due April 2018 (XS0609574016) that were issued in 2011 when private equity firm, BC Partners, became the majority owner.”

The collapse of Phones4U, brought about after Vodafone and EE failed to renew service agreements with the retailer, has resulted in thousands of people across the UK losing their jobs.

Certain assets have been realised with Vodafone acquiring 140 stores from the administrator, which preserved nearly 900 jobs, while similar agreements have been concluded by EE and Dixons Carphone.

Despite these deals, a representative of the administrators, Paul Copley, has reiterated to bondholders that they should manage their expectations for further large asset sales. He said it was “highly unlikely” that there would be as many stores sold to new buyers as there had been to EE and Vodafone.

The collapse of the business saw the value of the senior notes fall significantly from 102.5 in August to 62 at the beginning of September and following the termination of the EE relationship it hit an all-time low of 18.5 in mid-September.  

Ms Mulcahy said the latest update by administrators confirmed it was unclear as to what return might be available for bondholders, particularly in light of a potentially large VAT liability, which may be treated as an administration expense, thus gaining priority over other creditors.  

“A bondholder wanting to negotiate recovery of their holding with the administrators should ensure that have taken the correct legal advice,” she said.
 
“However, it should be noted that bondholders who gain access to any private information about the administration, will be unable to trade their positions. This is not the last we will hear of the Phones4U administration as there are still many issues to be decided upon.”