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Highberry fails to force Colt into administration
'Shaky, tentative and speculative'
An attempt by hedge fund Highberry Ltd to force the telecoms company Colt Telecom Group Plc into administration, has been thrown out of court.
In the High Court in London, Mr Justice Jacob dismissed the claims of Highberry as "shaky, tentative and speculative peering into the middle distance", and concluded that there was no basis for forcing Colt in administration. Summing up, he said: "There is not and never has been, any substance whatever in their petition. It should never have been launched."
Highberry Ltd, which is part of New York-based Elliott Associates, had attempted to show that Colt would become insolvent in the next few years, and would not have the funds necessary to repay or refinance around 1bn pounds ($1.5bn) in bonds due between 2005 and 2009. The claim was vigorously denied by Colt, which said it had cash reserves of 1bn pounds ($1.5bn).
Colt accused Highberry of buying 75m pounds ($118.5m) of its loan notes at a discount and seeking to make a speculative profit by forcing "an unjustified transfer of value from shareholders to noteholders" that a debt-for equity swap would bring.
If Highberry had been successful in persuading Mr Justice Jacob that Colt was heading for bankruptcy, it would have opened the way for a host of similar actions against highly indebted companies.