Singapore-based Global A&T Electronics Ltd.'s (GATE) bondholders, which include private equity firms Blackstone Group LP and Farallon Capital Management LLC, on Monday filed a class suit against the company. The lawsuit is pleading the court to reverse a debt swap that gave higher priority to junior noteholders, Reuters said in a report.
According to the report, the class suit was filed by New Jersey corporate law firm Lowenstein Sandler LLP. Lowenstein Sandler acts for about half of the bondholders of the pre-swap senior notes maturing in 2019. The said senior bonds have an outstanding amount of $625 million.
Investors opted for a legal action after delivering a notice to GATE in November, prodding the company to nullify the swap. The transaction involved over $500 million of junior notes being exchanged for senior bonds. This caused an increase in the total outstanding amount of notes due in 2019 to $1.1 billion, Reuters said.
The report, citing distressed debt experts, said that the debt swap enabled GATE to steer clear of a possible restructuring. A debt restructuring could prompt a dilution of ownership.
Lowenstein Sandler filed the lawsuit in the New York County Supreme Court, Reuters said.
GATE is the parent company of United Test and Assembly Center Ltd. (UTAC), the report said. Based on its website, UTAC provides semiconductor assembly and test services. It was acquired by private equity firms Affinity Equity Partners and TPG Capital LP for S$2.2 billion ($1.8 billion) in 2007 via a leveraged buyout, Reuters said.
"We have not received a copy of any lawsuit, but we stand by our prior comments that the exchange was in full compliance with all agreements. We may comment further in the event we receive any legal filings", a GATE spokeswoman told Reuters.
GATE's bond price fell from 88 cents on the dollar to as low as 68 cents prior to the debt swap. It has since rebounded to about 86 cents well before the class suit, the report said.
