On Mash Group’s corporate restructuring application
Mash Group Plc's restructuring application was heard in the Helsinki District Court on Tuesday, March 17, 2020. According to information received by the company, the decision will be made on April 7, 2020, almost five months after the unfortunate credit event. The slowdown has been actively influenced by the actions of the creditors who opposed the opening of the reorganization process. Mash would like to thank the district court for swiftly advancing the case and enabling video conferencing in the face of coronavirus turbulence.
Mash has approximately 400 creditors with approximately EUR 120 million in claims from the company. The application has been supported by more than 140 creditors representing around EUR 30 million, ie 25% of the debt or 35% of the creditors. Supporters include: a Finnish bank and Ålandsbanken Rahastyhtiö Oy, whose representative also took part in Tuesday's hearing. As previously reported, a few debtors incl. Front group, United Bankers and UMO group are opposing the restructuring.
Tommi Lindfors, Chairman of Mash Group, says it is difficult to understand the reasons to oppose the corporate restructuring process. “In such a situation, you should only make informed, thoughtful decisions that will ensure the best outcome for both creditors and the company. This means finding out the best option, which is precisely the purpose of the reorganization procedure. When a concrete reorganization program is completed in the process, the creditors still have the opportunity to support or oppose it.”
Mash Group has previously stated that in the event of bankruptcy, the recovery rate for creditors would be 1-9% of the debt (initial estimate) at the end of a two-year process, according to an external law firm realization calculation. Because opposition to the reorganization process has significantly delayed the start of the reorganization, the law firm has re-estimated that the recovery rate for bankruptcy is less than 1% of the debt. "Bankruptcy would therefore mean a repayment rate of less than EUR 1.2 million for a total debt of EUR 120 million, which would be paid to creditors in 2022," Lindfors sums up.
Lindfors goes on to say: “Mash based its judgment on the best outcome for creditors, based on the facts at its disposal, and dozens of written indications of new investments, while estimating that the probable rate of recovery would be significantly higher than in bankruptcy. Because of this and constant opposition, it seems that Front and United Bankers in particular are acting strangely by ignoring the facts presented to them. Their views on opposing corporate restructuring seem to be based on faith, not real facts and calculations. The companies also use very expensive legal services to counter the restructuring, forcing Mash to obtain similar services in a crisis situation. ”
If no corporate restructuring is initiated, the temporary suspension of payments and debts to Mash Group Plc will be lifted, which will give the company eight days to pay its tens of millions of debts and invoices. The company is currently not in a position to do so, and it would be the responsibility of the Board of Directors to file for bankruptcy.
“As I understand that Front group has not made the proper announcement, I believe it is Mash's responsibility to declare the Front's conflict of interest in the restructuring case.
As has been disclosed in the past, Front has a significant share of the Mash Group's senior debts, placing them at a disadvantage in the restructuring process compared to other unsecured creditors. These loans have no voting rights in corporate restructuring and are paid out only after the principal has been repaid in full. They therefore have a clear conflict of interest with senior creditors. Front Finance Ltd has also filed an application for corporate restructuring on March 18, 2020 after failing in voluntary reorganization negotiations, which illustrates the challenge of finding a voluntary solution with creditors. It is very strange that Front Finance at the same time applies for corporate restructuring of their own but is against Mash's corporate restructuring.
In this situation, I see that acting in the best interests of investors is at least maximizing the return on a substantial investment, that is, assessing, for example, whether reorganization could lead to a better return for investors than bankruptcy,” Lindfors says.
“Here again, I want to correct the misrepresentation in the public that the problem with voluntary negotiations would have been the amount of restructuring debt and the terms on which it would be converted into Mash shares. This has not been a major problem. The real problem has been that creditors have made claims that have made it virtually impossible to obtain new financing. A financing company needs new financing, so it is the most essential part of revitalizing the company,” Lindfors states.
“In November 2019, the Mash train derailed due to the unsuccessful repayment of one bond. It has been debated now more than 4 months, whether it is worthwhile to clarify in a structured process, with the help of professionals, if the train is to be brought back on track or not. This is expensive and completely unnecessary, and the creditors will, in any event, be able to vote in the reorganization process whether or not they approve the reorganization program there,” Lindfors concludes.
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