The British backers of Bollywood firm Eros failed
The British backers of Bollywood firm Eros failed
- Company is being taken to court in London and under investigation in India
- Bonds trade at an artificially low price on the London Stock Exchange
- Eros launched a £50 million seven-year bond issue in 2014, with an annual interest rate of 6.5%
Beleaguered British investors in Bollywood film group Eros have been dealt a triple blow.
The company is being taken to court in London and under investigation by the Modi government in India. To top it off, the bonds are trading at an artificially low price on the London Stock Exchange.
Eros launched a £50 million seven-year bond issue in 2014, paying a generous annual interest rate of 6.5 per cent. Hordes of savers signed up at a price of £1.
But the company ran into difficulties during the pandemic and has yet to recover. It recently restructured its bonds so that they do not mature until 2026.
Under terms announced in March, Eros, run by London’s ultra-wealthy Lulla family, offered to buy back up to half of its bonds at 60 percent of their value, raise interest rates to 9 percent and extend the date. on which the money is to be repaid.
Unhappy ending? British depositors backed the Bollywood bond plan
Hundreds of bondholders agreed, but the Lullas then changed their mind and offered to buy just £2m worth of bonds and possibly delay payment until March next year. The news caused Eros bond prices to fall to 16 pence.
The deal has come under further pressure following news that Indian regulators are investigating the company’s accounts and have banned several directors from their posts.
Investors face even bigger losses as Eros bonds trade as if the company will not make any interest payments when they mature in October.
Traders’ decision highlights the market’s disillusionment with Eros and means investors could lose hundreds of pounds in unpaid interest if they choose to sell their bonds.
Bondholders who agreed to the restructuring earlier this year don’t even have that choice, as their bonds have been frozen since April.
Eros has now agreed in principle to return investors their bonds, but the seemingly unprecedented process has yet to be resolved.
A campaign group is being formed to fight for investor rights, but the saga took a new turn last week when the Bank of India, which has lent Eros significant sums, filed a claim against the company in the London Circuit Commercial Court. Just days earlier, India’s Ministry of Corporate Affairs ordered an inspection of Eros accounts.
Eros, approached for comment, admitted it was being sued in London but denied claims it is acting against the interests of bondholders.