Bollywood Behemoth’s Bond Blunder Sparks Investor Fury
A major player in the Indian film industry, Eros Media World, has been forced into an embarrassing U-turn by financial watchdogs after a significant failure to adhere to London market regulations. This significant misstep has left a trail of disgruntled investors, many of whom are now struggling to recoup their £50 million investment in bonds that were abruptly removed from the London Stock Exchange.
The saga began in 2014 when Eros Media World, once a darling of the Bollywood scene, successfully launched its bonds, attracting considerable investor interest. However, the company’s fortunes took a downturn, exacerbated by the global pandemic. Since then, the firm has faced increasing difficulties in meeting its financial obligations, with investors experiencing delayed or entirely missed interest payments. Compounding the issue, Eros has also attempted to reduce the final repayment amount owed to bondholders.
Regulatory Rumble and a Relisting Fiasco
The situation escalated last month when the Financial Conduct Authority (FCA) delisted the bonds from the stock exchange, acting on the assumption that they had reached their maturity date. This move, intended to streamline market operations, inadvertently trapped investors.
However, Eros Media World has since admitted to providing inaccurate information to the regulators, acknowledging that its bonds should never have been removed from trading. In a move described as “unparalleled,” the FCA subsequently relisted the bonds. The regulator stated its decision was prompted by a “lack of communication from the issuer around the bonds’ maturity date,” underscoring its commitment to ensuring that “investors receive clear, accurate, timely information.”
Ordinarily, such a relisting would empower investors to sell their bonds and recover at least some of their capital. Yet, Eros Media World has requested an immediate suspension of trading on its bonds, citing ongoing efforts to negotiate a new deal with investors. This request has further fuelled the frustration and disbelief among those holding the company’s debt, particularly as over a year has passed since Eros last made a promised payment.
A Trail of Missed Payments and Unfulfilled Promises
Last year, Eros outlined a plan to compensate investors, proposing an upfront cash payment of up to 7.5 pence per bond by March 2025, followed by a further payment of up to 57.5 pence derived from the sale of shares in a related entity. However, neither the initial cash payment nor the anticipated share sale has materialised. This failure to deliver on its commitments means that Eros bonds are now technically in default, a status that should, in theory, allow investors to pursue the film group for the outstanding funds.
The Default Dilemma and Trustee Troubles
The path to recovery for these bondholders is, however, complicated by the intricacies of City regulations. Under current rules, bondholders can only initiate legal action once a formal notice of default has been officially declared on the London Stock Exchange. Crucially, this notice must originate from the bond’s trustees, who are appointed specifically to safeguard the interests of bondholders.
The appointed trustees for Eros’s bonds, a firm named Truva, have so far refrained from issuing a default notice. This inaction has sparked significant outrage from a dedicated bondholders’ action group. While Truva is understood to believe its decision is justified by Eros’s engagement with major bondholders and its ongoing work on a new recovery plan, the action group argues that trustees should not require upfront assurances of cash simply to issue a default notice.
Expert Opinion and Potential Payouts
Further complicating matters, legal advice commissioned by the bondholders’ action group and funded by its members has confirmed that Eros is indeed in default and that investors could be owed substantial sums. A document reviewed by The Mail on Sunday, prepared by the prominent City law firm Stephenson Harwood, outlines the potential consequences of a default notice. The firm stated that if such a notice were issued to the market, “The bonds would immediately become due and payable at their nominal amount together (if applicable) with accrued interest.”
This means an investor who originally purchased £1,000 worth of bonds could potentially be entitled to that full amount, plus accrued interest, which could amount to approximately £90 per year. This stands in stark contrast to Eros’s most recent proposal, which suggested a maximum payout of £650 per £1,000 of bonds owned. The film group’s current, unfinalised plan is rumoured to be even less generous than its previous offer, leaving investors in a precarious and deeply unsatisfactory position.
