A pre-pack storm that won’t subside
I READ with interest the news that the ICAEW has launched an investigation into Ernst and Young’s handling of the “jumbo sized”, and therefore lucrative, pre-pack administration of Greek telecoms giant Wind Hellas.
That company folded in 2009 owing roughly £1.3bn but was sold back to its Egyptian billionaire owner in a pre-pack deal, and now trades as Weather Investments. Junior bondholders in Wind Hellas, who lost millions as a result of the administration, have raised serious questions about various alleged conflicts of interest surrounding this case.
It has been asked as to why E&Y took on the administration when it had pre-existing commercial ties with other members of the Wind Hellas group.
To be honest, as a credit information specialist, I’ve never been enamoured with the notion of pre-packs, and I’m pretty sure the rest of the credit management industry is right behind me on this one.
When a company goes bust owing you money, there’s nothing more galling than to see a similar company run by the same management team start to trade as if nothing had happened. In these situations, the interest of certain parties (owners, employees, and dare I say, auditors) always seem to be put well ahead of those of poor old unsecured creditors.
If we must have them, pre-pack administrations must be governed by rules that must be rigidly applied and strictly adhered to, otherwise many will be left with a sour taste in the mouth and a feeling of being hard done by.