Lender Can't Get 'Veto' Over Travelex Restructuring

By Christopher Crosby
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Law360, London (May 11, 2020, 6:28 PM BST) -- A London judge refused Monday to grant a Congolese lender a veto over Travelex's plans to restructure its struggling business but ruled that the British foreign exchange service, which owes the bank $60 million, had to come clean on its financial difficulties.

High Court Judge Colin Birss said that a Travelex unit that supplies hard currency did not intentionally deceive the Democratic Republic of the Congo-based Rawbank SA when it confirmed, but failed to deliver, $60 million in cash in early March.

Travelex Banknotes Ltd. had every intention of delivering the cash to Kinshasa when the order was placed, only to suffer a massive liquidity crisis due to travel restrictions, hindering intentional deliveries that were imposed as a result of the COVID-19 pandemic, Judge Birss noted.

Rawbank had demanded a say over any transactions out of TBL over fears it would become a "cash cow" propping up other companies in the Travelex group.

Though he acknowledged there was no way to know if Travelex would move assets beyond the court's jurisdiction, the judge said creditors can't use freezing orders to guarantee payment.

"It is clear that's not what freezing orders are for," Judge Birss said.

But the judge ordered TBL to disclose its draft unaudited accounts and warn Rawbank in advance of any plans to transfer more than £5 million pounds ($6.18 million) out of the group, saying the company had not taken its disclosure obligations seriously.

The company is looking for a buyer and hopes to complete restructuring by the end of May, lawyers for Travelex said. Proceeds from the sale will be used to pay back the company's creditors, the judge noted Monday.

The bid for a freezing order comes as Travelex plots a way out of its financial woes with its creditors. The company was hit by a major cyberattack this year that led to shutdowns, and it has also struggled with the impact of the pandemic as it becomes harder to move money and travelers demand less foreign currency.

TBL, a Travelex subsidiary, supplies U.S. bank notes to financial institutions in Africa, such as Rawbank, for a fee and in exchange delivers the currency in cash.

A lawyer for Rawbank warned the judge last week that half of its equity remains in limbo, a dire scenario that could lead to a run on the bank. The freezing order would have granted Rawbank the ability to halt transactions and wield what the judge called a "veto" over Travelex's restructuring plans. Rawbank argued that it wasn't making unreasonable demands, but complained that Travelex had failed to explain the restructuring process clearly. 

The bank accused Travelex employees of guaranteeing delivery in March, even though a third-party security provider had not confirmed the shipment. Rawbank was denied a refund in April after Travelex said it had a legal obligation to carefully consider which creditors to pay in light of the restructuring process.

A spokesperson for Travelex declined to comment.

Rawbank did not immediately return a request for comment. 

Rawbank is represented by Marcia Shekerdemian QC of Wilberforce Chambers and Alex Cunliffe of Lamb Chambers.

Travelex Banknotes Ltd. is represented by Tom Smith QC of South Square.

Complete counsel information was not available.

The case is Rawbank SA v. Travelex Banknotes Ltd., case number FL-2020-000012, in the High Court of Justice of England and Wales.

--Editing by Alyssa Miller.

For a reprint of this article, please contact reprints@law360.com.

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