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19 Oct 2006

German Comapny Moves to Restructure with London Hedge Funds

A group of hedge funds based in London have been restructuring an agreement with Schefenacker, a German vehicle parts company with whom they have investments.

Many of Schefenacker’s creditors are in London and the group of hedge funds believe it would be easier to organise a speedy restructuring if the company would move its headquarters to the UK. Creditors there can force stakeholders to accept the new plan through a scheme of agreement, which is not possible in Germany.

Schefenacker refinanced $400m after its business came under pressure last year and the bonds and loans were acquired by London and New York hedge funds. Last month, the company issued a dire earnings statement that left rating agencies downgrading its debt to a level that implies the company is close to bankruptcy.

The bonds went from about 80% of face value to 30%, and its loans now trade at about 85% of face value, compared with 103% three weeks ago. Schefenacker said on Monday that there was no formal agreement on such a move yet, and it stressed that any move would not affect its German operations.

Schefenacker has 27 production plants and six engineering centres gobally, employing more than 7,900 people the company supplies to car makers such as DaimlerChrysler AG, Ford Motor Co. and General Motors Corp.

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