Legal Business Blogs

Hedge funds pick Quinn Emanuel and Boies in multi-million dispute with Indian car parts maker

Litigation powerhouses Quinn Emanuel Urquhart & Sullivan and Boies, Schiller & Flexner, have been selected by hedge funds who purchased bonds issued by India’s Castex Technologies to prepare for a $200m dispute in the English courts.

Quinn Emanuel’s London co-managing partners, Richard East and Sue Prevezer QC, have been enlisted by one group of hedge funds to prepare a case alleging unlawful share manipulation by car parts maker Castex after a steep rise in its share price triggered an ability to swap its bond debt for equity in the ailing company.

Likewise, Boies Schiller’s London managing partner Natasha Harrison has been drafted in to represent another hedge fund that bought Castex bonds in a $200m issue in 2012. Quinn is representing a group of hedge funds who have interests in convertible bonds, known as the 6% group, while Boies is representing a major holder of the 2.5% foreign currency convertible bonds that are set to be converted to equity at the end of September. The two sets of bonds are governed by English law and have an English jurisdiction clause to send disputes to London’s courts.

Castex’s share price on the Bombay Stock Exchange tripled between April and July, potentially allowing the manufacturer to swap the bondholder debt into equity. Its share price has fallen since then.

The bondholders, which have already complained to the Bombay Stock Exchange (BSE), the National Stock Exchange of India (NSE) and the Indian regulator Securities and Exchange Board of India (SEBI), allege that the mandatory conversion of the bonds into equity was carried out by fraudulent means and the right exercised unlawfully.

East told Legal Business: ‘Our clients suspect foul play and we have been instructed to prepare for litigation. There was a huge increase in the stock, which almost tripled, and it all coincided with the mandatory conversion. The stock price has since gone down every day.’

Harrison added: ‘Castex is one of a number of cases we have been instructed on behalf of international investors against Indian listed companies who have failed to implement proper corporate governance, and/or have breached or defaulted upon their foreign currency convertible bonds. It will serve to discourage international investment into India if this type of conduct and lack of corporate governance is allowed to prevail.’