BusinessCompany NewsHedge funds to challenge pre-pack value

Hedge funds to challenge pre-pack value

Hedge funds will be the first creditors to force administrators into the courts and fight over the value gained from a pre-packaged administration, according to experts

With growing investment in distressed businesses, hedge funds are in the
prime position to challenge administrators if they believe they have failed to
gain sufficient value from an insolvent company’s sale.

Deloitte reorganisation services partner Neville Kahn said these funds could
be willing to cover the costs of potential litigation, as they would look to
pre-packs to gain some return on their investment. ‘Some with lower rating
securities might say they should have got more, and then look to increase the
value of their security.’

Begbies Traynor senior London partner Nick Hood said the hedge funds would
challenge a major pre-pack transaction, and would ‘likely be a hard-nosed
creditor with little emotional attachment [to the business] but badly let down’.

Quick sales of struggling businesses, known as pre-packs, have proved
controversial. But business recovery experts argue pre-packs save businesses
that would collapse if left to trade or search longer for a buyer.

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