Bid to put Colt Telecom into administration defeated
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Colt Telecom has beaten off an audacious High Court challenge from an aggressive American hedge fund to have it put into administration.
20 December 2002 Telecoms company Colt has today beaten off an audacious High Court challenge from an aggressive American hedge fund to have it put into administration.
New York-based Highberry Group had claimed that Colt was haemorrhaging cash at such a rate that the company would go bankrupt within two years. Instead, it should be put into administration and the debt burden reduced by means of a debt-for-equity swap, argued Highberry.
However, Colt successfully counter-argued that this represented little more than a cynical ploy by Highberry to take an equity stake in Colt at a discount and at the expense of the company's battered stockholders, who would be left with almost nothing.
Justice Jacob agreed and was scathing in his summing up of the hedge fund's actions. "The purpose was very clear from the outset - cash for Highberry. There is not, and never has been, any substance whatever in this petition. It should never have been launched," said Justice Jacob.
He also refused Highberry leave to appeal and ordered it to pay costs of £1.1 million (€1.7m).
Colt was founded in 1993 to take advantage of telecoms deregulation in the UK. Backed by Fidelity Investments, it initially built its own fibre optic network in the City of London before expanding into major cities across Europe.
Colt's stock price surged during the technology boom and the company even became a member of the FTSE-100 index of the UK's biggest companies - before the bubble burst and the company's stock price plunged.
Highberry is owed £75 million (€117m) as a bond holder, but repayment is not due for four years.
