Creditors target former TPG affiliates

Representatives for two dissolved vehicles of private equity firm TPG Capital have missed a deadline to respond to involuntary Chapter 7 bankruptcy petitions filed against them by a group of creditors.

No one representing the now defunct vehicles, TPG Troy LLC and T3 Troy LLC, had acknowledged the petitions lodged with the U.S. Bankruptcy Court for the Southern District of New York in Manhattan as of midday Wednesday, Feb. 13. Their period to respond to the petitions, filed on Dec. 21, ran out on Tuesday.

The petitioners, creditors SPQR Capital (Cayman) Ltd., Lansdowne Capital SA and Crest One SpA, wasted no time applying pressure. On Tuesday, they asked Judge Martin Glenn for the right to obtain documents regarding the financial condition of the estates and conduct depositions of the involved parties. The petitioners believe that TPG and fellow PE firm Apax Partners LP used the vehicles as shell companies to siphon €400.6 million ($550 million) away from creditors.

"In the hands of modern private equity, this kind of fraud is made with a number of shell companies and dissolution of companies designed to block creditors from pursuing assets," the petitioners wrote in court papers.

A TPG spokeswoman declined to comment on the involuntary petitions.

Alleged debtors typically have 21 days from receiving a summons to respond to an involuntary bankruptcy petition. The dissolved TPG vehicles received theirs on Dec. 26, but the petitioners requested an additional summons on Jan. 18 because the agent for the alleged debtors said "it no longer maintained an active record for these companies," according to a letter to the court from the petitioners' counsel Jared B. Stamell of Stamell & Schager LLP.

The second summons was issued on Jan. 22, giving the debtors until Feb. 12 to respond.

SPQR, Lansdowne and Crest One are owed €111.7 million from promissory notes issued by Hellas Telecommunications II SCA and Hellas Telecommunications Finance SCA on Dec. 21, 2006. Hellas Telecommunications I Sarl, the parent of the other two Hellas entities, guaranteed the debt.

Hellas Sarl, in turn, was an acquisition vehicle originally owned by TPG and Apax.

TPG formed TPG Troy and T3 Troy on June 2, 2005, two months after it joined with Apax to pay $1.3 billion to acquire Greece-based wireless operator TIM Hellas Telecommunications SA. The two PE firms ultimately flipped the company to Weather Investments SpA, now known as Wind Telecom SpA, in 2007.

A month after creating the two vehicles, TPG and Apax moved 50% of their ownership in Hellas Sarl to them. The alleged debtors subsequently transferred 9% of their shares to other TPG entities.

The Hellas entities became insolvent after the TPG-Apax buyout, but nevertheless, on Dec. 21, 2006, Hellas II issued €1.15 billion in subordinate notes, Hellas Finance issued €200 million in pay-in-kind notes and Hellas Telecommunications issued €97.25 million in senior notes.

The petitioners alleged that the Hellas entities already had a €1 billion deficit at the time of the offering.

The alleged debtors received €400.6 million of the loan proceeds and then distributed them to other TPG and Apax affiliates, the petitioners claimed.

TPG Troy and T3 were then dissolved on Dec. 17, 2007.

The petitioners believe the siphoning of the loan proceeds constituted fraud and ultimately rendered the Hellas entities insolvent.

"The substance of the transaction is a fraudulent scheme: money was borrowed in the name of a company and, on the same day, deposited into the bank accounts of the company's owners, leaving the company in whose name the loan was made unable to repay the debt," court papers said.

Indeed, Hellas defaulted on the notes and then filed for administration with the High Court of Justice of England and Wales on Nov. 26, 2009. By the time it filed, Hellas owed €1.8 billion to senior noteholders and €1.24 billion to subordinate noteholders.

The English court ordered Hellas' liquidation on Nov. 30, 2011. Andrew Lawrence Hosking and Carl Jackson of Grant Thornton UK LLP were appointed as liquidators on Dec. 5, 2011.

The liquidators then initiated a Chapter 15 petition for Hellas Telecommunications II in the Manhattan court on Feb. 16, 2012. Glenn granted the debtor recognition of its foreign main proceeding on March 14.

Hellas Telecommunications (Luxembourg) V SCA previously sought Chapter 15 relief on Nov. 12, 2010, in the U.S. Bankruptcy Court for the District of Delaware in Wilmington. Judge Kevin J. Carey granted recognition of its U.K. insolvency as a foreign main proceeding on Dec. 13, 2010.

Stamell and fellow petitioners' counsel Andrew R. Goldenberg could not be reached for comment.