Beleaguered UK investors in Bollywood film group Eros have been dealt a triple whammy.
The company is being taken to court in London as well as being under investigation from the Modi government in India. To cap it off, its bonds are trading at an artificially low rate on the London Stock Exchange.
Eros launched a £50m seven-year bond issue in 2014, paying a generous 6.5 per cent annual interest. Hordes of savers subscribed at a price of £1.
But the company fell 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 the ultra wealthy London-based Lulla family, offered to buy back up to half its bonds at 60 per cent of their value, to raise the interest to 9 per cent and to delay the date when the funds need repaying.
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Hundreds of bondholders agreed but the Lullas then changed their minds, offering to buy just £2m of bonds and potentially putting off payment until next March. The news sent Eros bond prices tumbling to 16p.
Further pressure has been heaped on the deal following news that Indian regulators are investigating the company’s accounts and have barred several directors from holding office.
Investors face even greater losses because Eros bonds are trading as if the company will not make interest payments when they fall due in October.
The decision by traders highlights market disillusion with Eros and means that investors stand to lose hundreds of pounds in unpaid interest if they choose to sell their bonds.
Bondholders who agreed to the restructuring earlier this year do not even have that choice, as their bonds have been frozen since April.
Eros has now agreed in principle to let investors have their bonds back but the process, seemingly unprecedented, has yet to be resolved.
An action group is being formed to fight for investors’ rights but the saga took a fresh turn last week when the Bank of India, which has lent Eros substantial 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.
Approached for comment, Eros admitted it was being sued in London but denied claims that it is acting against bondholders’ best interests.
