(Reuters) -British engineering firm GKN's owner Melrose Industries has refuted claims of a lapse of communication made by bondholders threatening enforcement action.
Melrose Chief Executive Simon Peckham dismissed allegations made by holders of GKN's euro medium-term notes (EMTNs) programme. The company issued the bonds in 2017 to raise 2 billion pounds ($2.5 billion), with 130 million pounds still outstanding, Peckham said.
In a letter to GKN dated Jan. 16 the group, which hold over 72% of the bonds, said the engineer had conducted a tender offer of the notes at a "substantial discount to par" without informing it of an "event of default" following a proposal to separate GKN Automotive and GKN Metallurgy.
The group also said its attempts to engage with GKN were denied. However, Peckham said those claims were untrue.
"We carefully considered the arguments raised by the noteholders when they raised them with us," he said. "We responded to the noteholders to explain why their claims of an event of default are spurious both as a matter of fact and law".
The bondholders had also said that GKN had failed to inform ratings agency Fitch of the event of default, which could have potentially led to a misleading rating given to the EMTNs. Fitch declined to comment on the matter.
Before Peckham's letter, a representative for Melrose had told Reuters in a statement that the company "will report the creditor group to the relevant authorities".
Melrose in September said it intended to separate the two automotive and metallurgy divisions and list them as a separate independent business.
The ad hoc group said it was in the process of commencing enforcement action.
($1 = 0.8139 pounds)
(Reporting by Sinchita Mitra and Pushkala Aripaka in Bengaluru; Editing by Maju Samuel, Shinjini Ganguli and Lisa Shumaker)