A GREEK multinational company has deprived creditors of £1.3 billion by claiming that a one-man London office was its global headquarters and exploiting lenient insolvency rules introduced by Labour.
Wind Hellas, Greece’s third-largest telecoms company, moved its assets to Britain from Luxembourg in August. Its tiny London head office consisted of one man, one desk and a computer.
Two weeks later it began the process leading to its adminstration, using a financial device known as a “pre-pack” which grew out of legislation championed by Gordon Brown when he was chancellor.
When Wind Hellas subsequently collapsed, more than a third of its debt was wiped out, including £9m owed to Royal Bank of Scotland (RBS), which is 84% owned by the taxpayer.
Creditors say the Wind Hellas deal shows Britain is becoming a “bankruptcy brothel”, with failed firms using UK laws to off-load debt.
One insolvency expert said “dozens” of foreign firms are planning to take advantage of Britain’s attractive insolvency regime.
The Greek economy is in the middle of a budget crisis that has rocked the euro.
Pre-packs allow owners of a struggling company to set up a new firm and then buy back the best stock, property and other assets from the original company.
The Wind Hellas pre-pack was the largest in British corporate history and yet it was overseen by a 33-year-old executive who had graduated from business school five years earlier.
The executive, Matthew Tippetts, had no experience of corporate insolvency and conducted business from his small office using mobile phones and a free email account. Sources close to him, however, said he was advised by experienced professionals.
Wind Hellas is owned by Naguib Sawiris, 55, the Egyptian tycoon who is thought to be one of the richest men in Africa with personal wealth estimated at £2 billion.
Under the terms of the pre-pack deal, Wind Hellas’s assets were bought by Weather Investments, an investment vehicle controlled by Sawiris.
The new company, which was formed with approval from senior creditors, had been freed of £1.3 billion in debt which Wind Hellas owed to “subordinated bondholders”.
Besides RBS, the losers included some of the biggest names in the City of London, including Aberdeen Asset Management and Lloyds Banking Group.
Some of these bondholders are planning legal action against Weather Investments and perhaps even against Tippetts, who was appointed as an independent director to oversee the administration.
Tippetts has confirmed he was being paid by Weather Investments throughout the administration. Some creditors claim this is a conflict of interest, but a source close to Tippetts said details of his pay were made public and senior creditors approved the pre-pack. The source said Tippetts was paid a sum below £500,000 for his work during the administration.
Pictures of the young businessman have appeared on a social networking website showing him dancing with a young woman and swigging wine from a bottle.
Bertrand des Pallières, chief executive of SPQR, a hedge fund which lost millions in Wind Hellas’s collapse, said Britain is becoming a haven for firms seeking to jettison debts.
“Any business can set up a tiny office in London and cheat their creditors out of debts of hundreds of millions of pounds,” he said.
“This is entirely legal under UK laws — and signed off by High Court judges.”
Wind Hellas is the latest in a number of foreign companies that have used Britain’s insolvency regime, which was made more lenient under the 2002 Enterprise Act. Karl Clowry, a corporate partner with Paul Hastings, the law firm, said several dozen multinational companies were considering using Britain’s pre-pack system to reduce their debts.
A spokesman for the company which owns the reformed Wind Hellas declined to comment on Friday.
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