M&G under fire over Eros Media World Bollywood bond drama


Investment firm M&G under fire for failing to protect thousands of savers who bought bonds issued by struggling Bollywood film group, Eros Media World

Controversy: Thousands of savers bought bonds issued by Eros Media World

Controversy: Thousands of savers bought bonds issued by Eros Media World

One of the UK’s biggest investment firms is under fire for failing to protect thousands of savers who bought bonds issued by struggling Bollywood film group, Eros Media World.

M&G, which manages more than £340 billion of investors’ cash, has been accused of failing to defend the interests of bondholders.

Now a formal complaint against the firm has been lodged with Britain’s main financial regulator, the Financial Conduct Authority.

Eros, controlled by the ultra-wealthy Lulla family in India, launched a £50 million bond in London in 2014. It was supposed to be repaid in April, but in March the Lullas said they wanted to repurchase up to half their bonds at a price of 60p in the pound and delay repayment of the rest until 2026.

The deal came with a raft of controversial conditions, but investors jumped at it nonetheless, frustrated by Eros missing interest payments for months on end and troubled by the group’s failure to file accounts since 2021.

M&G was appointed as trustee within weeks of the new bond proposal. It was tasked with coordinating and representing bondholders should the need arise.

Since then, Eros has repeatedly let investors down. Three months since it first proposed a restructuring of its bond issue, the group has still not said how many bonds will be repurchased and when investors will receive their cash – information that was supposed to have been unveiled in April.

Hard-pressed bondholders who accepted the offer are paralysed, unable to sell their bonds and being forced to play a waiting game, with many suffering financial distress as a result.

Last week, action against Eros intensified when the Indian market regulator – the Securities and Exchange Board of India – said it had found evidence of accounting irregularities at the group.

Just days earlier, Eros announced in London that it had agreed to sell a key subsidiary, Eros Now, to a private technology firm controlled by the Lulla family. Eros says it took pains to negotiate the best possible terms, but the company has not said how much it will receive from the deal or why it chose to sell to another Lulla family entity.

Furious investors say the deal contravenes the terms of the original bond issue and that M&G needs to act. Financial consultancy 365IM has filed a formal complaint to the FCA, accusing M&G of failing ‘to discharge its duty as trustee and to act in the best interests of the bondholders’.

But M&G hit back at these allegations, saying: ‘We are carrying out our role in line with the bond documentation and liaising with both the company and bondholders.’ The FCA has refused to comment, but is understood to be keeping a close eye on events. Market watchers say that if Eros has breached the terms of its prospectus this should be a matter for the courts.

However, 20 per cent of bondholders would have to agree to this before M&G could act on their behalf. It is understood that Eros has not yet paid M&G. Eros has not responded to any of the allegations.

The 365IM consultancy is seeking support from bondholders to accelerate action. Bondholders wishing to join the 365 action group should contact the firm via Alex Dunkley at alex.dunkley@365im.co.uk

Time for watchdog to act 

The Stock Exchange retail bond market was set up to encourage individual investors to buy bonds.

But the Eros drama highlights worrying cracks in the system.

Bonds are traded on the Stock Exchange, but the Financial Conduct Authority (FCA) is responsible for deciding whether a company can list a bond or not – and that depends on whether its prospectus fully reflects what the business does.

If a company starts misbehaving once a bond has been issued, the FCA is limited in what it can do, particularly if that firm is privately owned or its shares are listed overseas.

The main onus falls on the trustees, appointed by the issuing company.

Trustees, however, are only obliged to take action if a certain number of bondholders ask them to – otherwise, they too are limited in the moves they can make.

None of this seems right. Bonds can be a great source of income and they rank higher than shares if a company collapses.

But the system needs to change – and soon.

                                                                                                                                                  Joanne Hart





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